SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 0-52105

KAISER ALUMINUM CORPORATION

Delaware (State of Incorporation)		94-3030279 (I.R.S. Employer Identification No.)
27422 PORTOLA PARKWAY, SUITE 350, FOOTHILL RANCH, CALIFORNIA (Address of principal executive offices)		92610-2831 (Zip Code)

Title of Class		Name of Exchange on Which Registered
Common Stock, par value $0.01 per share		Nasdaq Stock Market LLC

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No þ

     Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer þ		Accelerated Filer o		Non-accelerated Filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

     The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter (June 30, 2009) was approximately $.5 billion.

     Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

     As of February 15, 2010, there were 20,276,571 shares of common stock of the registrant outstanding.

 

 

     Documents Incorporated By Reference. Certain portions of the registrant’s definitive proxy statement related to the registrant’s 2010 annual meeting of stockholders are incorporated by reference into Part III of this Report on Form 10-K.

TABLE OF CONTENTS

		Page
PART I			1
Item 1. Business			1
Item 1A. Risk Factors			10
Item 1B. Unresolved Staff Comments			20
Item 2. Properties			21
Item 3. Legal Proceedings			21
Item 4. Submission of Matters to a Vote of Security Holders			21
PART II			22
Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters			22
Item 6. Selected Financial Data			24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk			53
Item 8. Financial Statements and Supplementary Data			55
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.			98
Item 9A. Controls and Procedures			98
Item 9B. Other Information			98
PART III			98
Item 10. Directors and Executive Officers of the Registrant			98
Item 11. Executive Compensation			98
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			98
Item 13. Certain Relationships and Related Transactions			98
Item 14. Principal Accountant Fees and Services			98
PART IV			99
Item 15. Exhibits and Financial Statement Schedules			99
SIGNATURES			100
INDEX OF EXHIBITS			101

     In this Report, all references to “Kaiser,” “we,” “us,” “the Company” and “our” refer to Kaiser Aluminum Corporation and its subsidiaries, unless the context otherwise requires or where otherwise indicated.

PART I

Item 1. Business

Forward-Looking Statements

     This Annual Report on Form 10-K contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear throughout this Report, including this Item 1. “Business — Business Operations,” Item 1A. “Risk Factors,” and Item 7. “Management’s Discussion and Analysis of Financial Conditions and Results of Operations.” These forward-looking statements can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans,” or “anticipates,” or the negative of the foregoing or other variations or comparable terminology, or by discussions of strategy.

     Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors. These factors include: the effectiveness of management’s strategies and decisions; general economic and business conditions, including cyclicality and other conditions in the aerospace and other end markets we serve; developments in technology; new or modified statutory or regulatory requirements; changing prices and market conditions; and other factors discussed in Item 1A. “Risk Factors” and elsewhere in this Report.

     Readers are urged to consider these factors carefully in evaluating any forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included herein are made only as of the date of this Report, and we undertake no obligation to update any information contained in this Report or to publicly release any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this Report.

Availability of Information

     We make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to section 13(a) or 15(d) of the Securities Exchange Act of 1934, free of charge through our Internet website at www.kaiseraluminum.com under the heading “Investor Relations” as soon as reasonably practicable after we electronically file such material with or furnish it to the Securities and Exchange Commission (“SEC”). The public also may read and copy any of these materials at the SEC’s Public Reference Room, 100 F Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-732-0330. The SEC also maintains an Internet site that contains the Company’s filings; the address of that site is http://www.sec.gov.

Business Overview

     Founded in 1946, Kaiser Aluminum Corporation’s primary line of business is the production of semi-fabricated specialty aluminum products. In addition, we own a 49% interest in Anglesey Aluminium Limited (“Anglesey”), which operated an aluminum smelter in Holyhead, Wales until September 2009, when the contract for the power supply that enabled smelting operations expired, and thereafter has operated as a secondary aluminum remelt and casting operation. Rio Tinto Plc owns the remaining 51% ownership interest in Anglesey and is responsible for the day-to-day operations of Anglesey. Our net sales were approximately $1.0 billion in 2009.

     Prior to September 30, 2009, our operations were organized and managed by product type and included two operating segments of the aluminum industry. The aluminum industry segments were Fabricated Products and Primary Aluminum. The Fabricated Products segment sells value-added products such as aluminum sheet and plate, extruded and drawn products, and forgings which are used in a wide range of industrial applications, including automotive, aerospace and general engineering end-use applications. The Primary Aluminum segment produced, through its interest in Anglesey, and sold commodity grade products as well as value-added products such as ingot and billet for which we received a premium over fluctuating commodity market prices, and conducted hedging activities in respect of our exposure to primary aluminum price and British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations.

     Following the cessation of the smelting operations at Anglesey on September 30, 2009, our operations consist of one operating segment in the aluminum industry, Fabricated Products. In addition to the Fabricated Products segment, we also have three other business units which consist of Secondary Aluminum, Hedging, and Corporate and Other. The Secondary Aluminum business unit sells value added products such as ingot and billet, produced from Anglesey, for which we receive a

portion of a premium over normal commodity market prices. Our Hedging business unit conducts hedging activities in respect of our exposure to primary aluminum price and British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations through September 30, 2009. Our Corporate and Other business unit provides general and administrative support for our operations. For purposes of segment reporting under United States Generally Accepted Accounting Principles (“GAAP”), we treat the Fabricated Products segment as its own reportable segment. We combine the three other business units, Secondary Aluminum, Hedging and the Corporate and Other into one category, which we refer to as All Other. All other is not considered a reportable segment (see “Business Operations” below).

     Our Fabricated Products segment is comprised of 10 north American production facilities that we operated in 2009, with nine such facilities in the United States and one in Canada. Through these facilities we manufacture rolled, extruded, drawn and forged aluminum products within three end use categories consisting of aerospace and high strength products (which we refer to as Aero/HS products), general engineering products (which we refer to as GE products) and custom automotive and industrial products (which we refer to as Custom products). See “Business Operations — Fabricated Products Segment” below for additional information.

     Through our North American production facilities, we produced and shipped approximately 429 million pounds of semi-fabricated aluminum products in 2009, which comprised 91% of our total net sales. We have long-standing relationships with our customers, which include leading aerospace companies, automotive suppliers and metal distributors. We strive to tightly integrate the management of the operations within our Fabricated Products segment across multiple production facilities, product lines and target markets in order to maximize the efficiency of product flow to our customers. In our served markets, we seek to be the supplier of choice by pursuing “Best in Class” customer satisfaction and offering a broad product portfolio.

     In order to capitalize on the significant growth in demand for high quality heat treat aluminum plate products in the market for Aero/HS products, commencing in late 2005, we undertook a major expansion at our Trentwood facility in Spokane, Washington, amounting to a total capital investment of approximately $139 million, the final phase of which was completed in the fourth quarter of 2008. The Trentwood expansion significantly increased our aluminum plate production capacity and enabled us to produce thicker gauge aluminum plate.

     In 2007, we announced an investment program in our rod, bar and tube value stream including a facility in Kalamazoo, Michigan, as well as improvements at three existing extrusion and drawing facilities. This investment program is expected to significantly improve the capabilities and efficiencies of our rod and bar and seamless extruded and drawn tube operations and enhance the market position of such products. We expect the facility in Kalamazoo, Michigan to be equipped with two extrusion presses and a remelt operation. Completion of these investments is expected to occur by late 2010.

     Due to the economic conditions, we announced plans in December 2008 to close operations at our Tulsa, Oklahoma facility and significantly reduce operations at our Bellwood, Virginia facility. The Tulsa, Oklahoma facility and the Bellwood, Virginia facility primarily produced, extruded rod and bar products sold principally to service centers for general engineering applications. The operations and workforce reductions were a result of deteriorating economic and market conditions. Approximately 45 employees at the Tulsa, Oklahoma facility and 125 employees at the Bellwood, Virginia facility were affected. The Tulsa, Oklahoma plant was closed in late December 2008. In May 2009, we announced plans to further curtail operations at our Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and shut down the Bellwood, Virginia facility temporarily during July 2009, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. In addition, we reduced our personnel in certain other locations during the second quarter of 2009, in an effort to streamline costs. Approximately 85 employees were affected by this reduction in force, principally at the Bellwood, Virginia facility.

Business Operations

     • Fabricated Products Segment

Overview

     Our Fabricated Products segment produces rolled, extruded, drawn, and forged aluminum products used principally for aerospace and defense, automotive, consumer durables, electronics, electrical, and machinery and equipment end-use applications. In general, the Fabricated Products segment manufactures products in one of three broad categories: Aero/HS products; GE products; and Custom products. During 2009, 2008 and 2007, our North American fabricated products manufacturing facilities produced and shipped approximately 429, 559 and 548 million pounds of fabricated aluminum products, respectively, which accounted for approximately 91%, 89%, and 86% of our total net sales for 2009, 2008 and 2007, respectively.

Types of Products Produced

     The aluminum fabricated mill products market is broadly defined to include the markets for flat-rolled, extruded, drawn, forged and cast aluminum products, used in a variety of end-use applications. We participate in certain portions of the markets for flat-rolled, extruded/drawn and forged products focusing on highly engineered products for Aero/HS products, GE products, and Custom products. The portions of the markets in which we participate accounted for approximately 20% of total North American shipments of aluminum fabricated mill products in 2009.

     Aerospace and High Strength Products. Our Aero/HS products include high quality heat treat plate and sheet, as well as cold finish bar, seamless drawn tube and billet that are manufactured to demanding specifications for the global aerospace and defense industries. These industries use our products in applications that demand high tensile strength, superior fatigue resistance properties and exceptional durability even in harsh environments. For instance, aerospace manufacturers use high-strength alloys for a variety of structures that must perform consistently under extreme variations in temperature and altitude. Our Aero/HS products are used for a wide variety of end uses. We make aluminum plate and tube for aerospace applications, and we manufacture a variety of specialized rod and bar products that are incorporated in diverse applications. The aerospace and defense market’s consumption of fabricated aluminum products is driven by overall levels of industrial production, airframe build rates, which are cyclical in nature, and defense spending, as well as the potential availability of competing materials such as composites. Demand growth has increased for thick plate with growth in “monolithic” construction of commercial and other aircraft. In monolithic construction, aluminum plate is heavily machined to form the desired part from a single piece of metal (as opposed to creating parts using aluminum sheet, extrusions or forgings that are affixed to one another using rivets, bolts or welds). Military applications for heat treat plate and sheet include aircraft frames for military use and skins. Products sold for Aero/HS applications represented 34% of our 2009 fabricated products shipments. Aero/HS products net sales in 2009 were approximately 46% of our 2009 fabricated products net sales. Value added revenues, which represents net sales less hedged cost of alloyed metal, for Aero/HS products was $278.0 million, or 54% of total value added revenue in 2009.

     General Engineering Products. GE products consist primarily of standard catalog items sold to large metal distributors. Our GE products consist of 6000-series alloy rod, bar, tube, sheet, plate and standard extrusions. The 6000-series alloy is an extrudable medium-strength alloy that is heat treatable and extremely versatile. Our GE products have a wide range of uses and applications, many of which involve further fabrication of these products for numerous transportation and other industrial end-use applications where machining of plate, rod and bar is intensive. For example, our products are used in the enhancement of military vehicles such as plating to protect ground vehicles from explosive devices, in the specialized manufacturing process for liquid crystal display screens, and in the vacuum chambers in which semiconductors are made. Our rod and bar products are manufactured into rivets, nails, screws, bolts and parts of machinery and equipment. Demand growth and cyclicality for GE products tend to mirror broad economic patterns and industrial activity in North America. Demand is also impacted by the destocking and restocking of inventory in the full supply chain. Products sold for GE applications represented 44% of our 2009 fabricated products shipments. GE products net sales in 2009 were approximately 37% of our 2009 fabricated products net sales. Value added revenues, which represents net sales less hedged cost of alloyed metal, for GE products were $164.7million, or 32% of total value added revenue in 2009.

     Custom Automotive and Industrial Products. Our Custom products consist of extruded/drawn and forged aluminum products for many North American automotive and industrial end uses, including consumer durables, electrical/electronic, machinery and equipment, automobile, light truck, heavy truck and truck trailer applications. Examples of the wide variety of custom products that we supply to the automotive industry include extruded products for bumpers and anti-lock braking systems, drawn tube for drive shafts and forgings for suspension control arms and drive train yokes. Other Custom product sales include extruded products for water heater anodes, truck trailers and electrical/electronic markets. For some Custom products, we perform limited fabrication, including sawing and cutting to length. Demand growth and cyclicality for Custom products tend to mirror broad economic patterns and industrial activity in North America, with specific individual market segments such as automotive, heavy truck and truck trailer applications tracking their respective build rates. Products sold for Custom applications represented 22% of our 2009 fabricated products shipments. Custom products net sales in 2009 were approximately 17% of our 2009 fabricated products net sales. Value added revenues, which represents net sales less hedged cost of alloyed metal, for Custom products were $70.7 million, or 14% of total value added revenue in 2009.

     End Markets In Which We Do Not Participate. We have elected not to participate in certain end markets for fabricated aluminum products, including beverage and food cans, building and construction materials, and foil used for packaging. We believe our chosen end markets present better opportunities for sales growth and premium pricing of differentiated products. The markets we have elected to participate in represented approximately 7% of the North American flat rolled products market and 55% of the North American extrusion market in 2009.

   Types of Manufacturing Processes Employed

     We utilize the following manufacturing processes to produce our fabricated products:

     Flat rolling. The traditional manufacturing process for aluminum flat-rolled products uses ingot, a large rectangular slab of aluminum, as the starter material. The ingot is processed through a series of rolling operations, both hot and cold. Finishing steps may include heat treatment, annealing, coating, stretching, leveling or slitting to achieve the desired metallurgical, dimensional and performance characteristics. Aluminum flat-rolled products are manufactured using a variety of alloy mixtures, a range of tempers (hardness), gauges (thickness) and widths, and various coatings and finishes. Flat-rolled aluminum semi-finished products are generally either sheet (under 0.25 inches in thickness) or plate (up to 15 inches in thickness). The vast majority of the North American market for aluminum flat-rolled products uses “common alloy” material for construction and other applications and beverage/food can sheet. However, these are products and markets in which we have chosen not to participate. Rather, we have focused our efforts on “heat treat” products. Heat treat products are distinguished from common alloy products by higher strength and other desired product attributes. The primary end use of heat treat flat-rolled sheet and plate is for Aero/HS and GE products.

     Extrusion. The extrusion process typically starts with a cast billet, which is an aluminum cylinder of varying length and diameter. The first step in the process is to heat the billet to an elevated temperature whereby the metal is malleable. The billet is put into an extrusion press and pushed, or extruded, through a die that gives the material the desired two-dimensional cross section. The material is either quenched as it leaves the press, or subjected to a post-extrusion heat treatment cycle, to control the material’s physical properties. The extrusion is then straightened by stretching and cut to length before being hardened in aging ovens. The largest end uses of extruded products are in the construction, general engineering and custom markets. Building and construction products represent the single largest end-use market for extrusions by a significant amount. However, we have chosen to focus our efforts on GE and Custom products because we believe we have strong production capability, well-developed technical expertise and high product quality with respect to these products.

     Drawing. Drawing is a fabrication operation in which extruded tubes and rods are pulled through a die, or drawn. The purpose of drawing is to reduce the diameter and wall thickness while improving physical properties and dimensions. Material may go through multiple drawing steps to achieve the final dimensional specifications. Aero/HS products is a primary end-use market and is our focus.

     Forging. Forging is a manufacturing process in which metal is pressed, pounded or squeezed under great pressure into high-strength parts known as forgings. Forged parts are heat treated before final shipment to the customer. The end-use applications are primarily in transportation, where high strength-to-weight ratios in products are valued. We focus our production on certain types of automotive and sports vehicle applications.

     A description of the manufacturing processes and category of products at each of our production facilities is shown below:

		Manufacturing
Location		Process		Types of Products
Chandler, Arizona		Extrusion/Drawing		Aero/HS
Greenwood, South Carolina		Forging		Custom
Jackson, Tennessee		Extrusion/Drawing		Aero/HS, GE
Kalamazoo, Michigan (1)		Extrusion		GE
London, Ontario		Extrusion		Custom,GE
Los Angeles, California		Extrusion		Custom, GE
Newark, Ohio		Extrusion/Rod Rolling		Aero/HS, GE
Richland, Washington		Extrusion		GE
Richmond (Bellwood), Virginia		Extrusion/Drawing		Custom, GE
Sherman, Texas		Extrusion		Custom,GE
Spokane, Washington		Flat Rolling		Aero/HS, GE

     As reflected by the table above, many of our facilities employ the same basic manufacturing process and produce the same type of end use products. Over the past several years, given the similar economic and other characteristics at each location, we have made a significant effort to more tightly integrate the management of our Fabricated Products business unit across multiple manufacturing locations, product lines, and target markets to maximize the efficiency of product flow to customers. Purchasing is centralized for a substantial portion of the Fabricated Products business unit’s primary aluminum requirements in order to maximize price, credit and other benefits. Because many customers purchase a number of different products that are produced at different plants, our sales force

and its management are also significantly integrated. We believe that integration of our operations allows us to capture efficiencies while allowing our facilities to remain highly focused.

   Raw Materials

     We purchase substantially all of the primary aluminum and recycled and scrap aluminum used to make our fabricated products from third-party suppliers. In a majority of the cases, we purchase primary aluminum ingot and recycled and scrap aluminum in varying percentages depending on various market factors including price and availability. The price for primary aluminum purchased for the Fabricated Products business unit is typically based on the Average Midwest Transaction Price (or “Midwest Price”), which from 2007 to 2009, has ranged between approximately $.03 to $.05 per pound above the price traded on the London Metal Exchange (or “LME”) depending on primary aluminum supply/demand dynamics in North America. Recycled and scrap aluminum are typically purchased at a modest discount to ingot prices but can require additional processing. In addition to producing fabricated aluminum products for sale to third parties, certain of our production facilities provide one another with billet, log or other intermediate material in lieu of purchasing such items from third party suppliers. For example, the Bellwood, Virginia facility typically receives some portion of its metal supply from either (or both of) the London, Ontario or Newark, Ohio facilities; and the Newark, Ohio facility also supplies billet and log to the Jackson, Tennessee facility and extruded forge stock to the Greenwood, South Carolina facility.

   Pricing

     The price we pay for primary aluminum, the principal raw material for our fabricated aluminum products business, typically is the Midwest Price, which consists of two components: the price quoted for primary aluminum ingot on the LME and the Midwest transaction premium, a premium to LME reflecting domestic market dynamics as well as the cost of shipping and warehousing. Because aluminum prices are volatile, we manage the risk of fluctuations in the price of primary aluminum through a combination of pricing policies, internal hedging and financial derivatives. Our three principal pricing mechanisms are as follows:

	•		Spot price. Some of our customers pay a product price that incorporates the spot price of primary aluminum in effect at the time of shipment to a customer. This pricing mechanism typically allows us to pass commodity price risk to the customer.
	•		Index-based price. Some of our customers pay a product price that incorporates an index-based price for primary aluminum such as Platt’s Midwest price for primary aluminum. This pricing mechanism also typically allows us to pass commodity price risk to the customer.
	•		Firm price. Some of our customers pay a firm price. We bear commodity price risk on firm-price contracts, which we hedge with financial derivatives. For internal reporting purposes, whenever the Fabricated Products segment enters into a firm price contract, it also enters into an “internal hedge” with the Hedging business unit within All Other, so that metal price risk resides in the Hedging business unit. Results from internal hedging activities between the Fabricated Products segment and the Hedging business unit are eliminated in consolidation.

   Sales, Marketing and Distribution

     Industry sales margins for fabricated products fluctuate in response to competitive and market dynamics. Sales are made directly to customers by our sales personnel located in the United States, Canada and Europe, and by independent sales agents in Asia, Mexico and the Middle East. Our sales and marketing efforts are focused on the markets for Aero/HS, GE, and Custom products.

     Aerospace and High Strength Products. Approximately 60% of our Aero/HS product shipments are sold to distributors with the remainder sold directly to customers. Sales are made primarily under contracts (with terms spanning from one year to several years) as well as on an order-by-order basis. We serve this market with a North American sales force focused on Aero/HS and GE products and direct sales representatives in Western Europe. Key competitive dynamics for Aero/HS products include the level of commercial aircraft construction spending (which in turn is often subject to broader economic cycles) and defense spending.

     General Engineering Products. A substantial majority of our GE products are sold to large distributors in North America, with orders primarily consisting of standard catalog items shipped with a relatively short lead-time. We service this market with a North American sales force focused on GE and Aero/HS products. Key competitive dynamics for GE products include product price, product-line breadth, product quality, delivery performance and customer service.

     Custom Automotive and Industrial Products. Our Custom products are sold primarily to first tier automotive suppliers and industrial end users. Sales contracts are typically medium to long term in length. Almost all sales of Custom products occur through direct channels using a North American direct sales force that works closely with our technical sales organization. Key demand drivers for our automotive products include the level of North American light vehicle manufacturing and increased use of aluminum in

vehicles in response to increasingly strict governmental standards for fuel efficiency. Demand for industrial products is directly linked to the strength of the U.S. industrial economy.

   Customers

     In 2009, our Fabricated Products business unit had approximately 540 customers. The largest, Reliance Steel & Aluminum (“Reliance”), and the five largest customers for fabricated products accounted for approximately 20% and 48%, respectively, of our net sales in 2009. The loss of Reliance, as a customer, would have a material adverse effect on us. However, we believe that our relationship with Reliance is good and the risk of loss of Reliance as a customer is remote.

  Research and Development

     We operate three research and development centers. Our Rolling and Heat Treat Center and our Metallurgical Analysis Center are both located at our Trentwood facility in Spokane, Washington. The Rolling and Heat Treat Center has complete hot rolling, cold rolling and heat treat capabilities to simulate, in small lots, processing of flat-rolled products for process and product development on an experimental scale. The Metallurgical Analysis Center consists of a full metallographic laboratory and a scanning electron microscope to support research development programs as well as respond to plant technical service requests. The third center, our Solidification and Casting Center, is located in Newark, Ohio and has a developmental casting unit capable of casting billets and ingots for extrusion and rolling experiments. The casting unit is also capable of casting full size billets and ingots for processing on the production extrusion presses and rolling mills.

     The combination of this R&D work and concurrent product and process development with production operations has resulted in the creation and delivery of value added Kaiser Select^® products.

     • All Other

     All Other contains three primary elements: (i) Anglesey-related activities, including primary aluminum production prior to September 30, 2009 and secondary aluminum production thereafter, (ii) hedging activities in respect of our exposure to primary aluminum price and British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations through September 30, 2009 and (iii) corporate and other activities.

     Primary/Secondary Aluminum production through Anglesey. Anglesey fully curtailed its smelting operations on September 30, 2009 and in the fourth quarter of 2009, began a remelt and casting operation producing value added products such as ingot and billet for which we received a portion of a premium over normal commodity market prices. Our secondary aluminum sales from the remelt and casting operation are accounted for net of cost of sales, and we reported zero net sales in 2009. Prior to fourth quarter of 2009, Anglesey operated as a smelter and produced commodity grade aluminum sow and/or value-added products such as ingot and billet for which we received a premium over normal commodity market prices. Our primary aluminum sales from the smelting operations were accounted for on a gross basis and represented approximately 9% of our total net sales for 2009.

     Prior to the cessation of the smelting operations, Anglesey produced in excess of 300 million pounds of primary aluminum in 2007, approximately 260 million pounds of primary aluminum in 2008 and approximately 230 million pounds of primary aluminum during the first nine months of 2009. We supplied 49% of Anglesey’s alumina requirements and purchased 49% of Anglesey’s aluminum output, in each case based on a market-related pricing formula. Anglesey produced billet, rolling ingot and sow for the United Kingdom and European marketplace. We sold our share of Anglesey’s output to a single third party at market prices. The price received for sales of production from Anglesey typically approximated the LME price. We also realized a premium (historically up to $.17 per pound above LME price depending on the product) for sales of value-added products such as billet and rolling ingot. To meet our obligation to sell alumina to Anglesey in proportion to our ownership percentage, we purchased alumina under a contract that provided adequate alumina for operations through September 2009 at prices based on the market prices for primary aluminum.

     Anglesey operated under a power agreement that provided sufficient power to sustain its smelting operations at near-full capacity until the expiration of such agreement at the end of September 2009. Despite Anglesey’s efforts to find a sustainable alternative to its power supply needs, no sources of affordable power were identified to allow for the uninterrupted continuation of smelting operations beyond the power contract expiration date. As a result, Anglesey fully curtailed its smelting operations as of September 30, 2009.

     In the fourth quarter of 2009, Anglesey commenced remelt and casting operations to produce secondary aluminum. Anglesey purchases its own material for the remelt and casting operation and sells its output to us and Rio Tinto, in proportion to our respective ownership interests. We expect Anglesey’s maximum production of secondary aluminum to ultimately reach approximately 140 million pounds per year, 49% of which will be sold to us in transactions structured to largely eliminate risks of inventory loss and metal price and currency exchange rate fluctuation with respect to our income and cash flow related to Anglesey.

     We fully impaired our investment in Anglesey during the fourth quarter of 2008, taking into account the full curtailment of Anglesey’s smelting operations due to its inability to obtain affordable power (which we had anticipated as a likely possibility), Anglesey’s cash requirements for redundancy and pension payments, uncertainty with respect to the future of its operations, and our conclusion at that time that we should not expect to receive any dividends from Anglesey in the foreseeable future. For the first half of 2009, based upon our continued assessment of the facts and circumstances, we recorded additional impairment charges of $1.8 million relating to our investment in Anglesey, such that our investment balance remained at zero.

     During the third quarter of 2009, Anglesey incurred a significant net loss, primarily as the result of recording charges for employee termination costs in connection with the cessation of its smelting operations. As a result of such loss and as we did not and are not obligated to (i) advance any funds to Anglesey, (ii) guarantee any obligations of Anglesey, or (iii) make any commitments to provide any financial support for Anglesey, we suspended the use of equity method of accounting with respect to our ownership in Anglesey during the quarter ended September 30, 2009. Accordingly, we did not recognize our share of Anglesey’s net loss for such period. We do not anticipate resuming the use of the equity method of accounting with respect to our investment in Anglesey unless and until (i) our share of any future net income of Anglesey equals or is greater than our share of net losses not recognized during periods for which the equity method was suspended and (ii) future dividends can be expected. We do not expect the occurrence of such event during the next 12 months.

     In June 2008, Anglesey suffered a significant failure in the rectifier yard that resulted in a localized fire in one of the power transformers. As a result of the fire, Anglesey operated below its production capacity during the latter half of 2008 and incurred incremental costs, primarily associated with repair and maintenance costs, as well as loss of margin due to the outage. Under its property damage and business interruption insurance coverage, Anglesey received insurance settlement payments of approximately 14.0 million Pound Sterling in 2008 and 2009. These payments did not have any impact on our results as we fully impaired the value of our share of the insurance proceeds received by Anglesey in 2008 and we did not record our 49% share of the 2009 settlement due to the suspension of equity method of accounting in the third quarter of 2009. We do not expect to receive any such insurance proceeds paid to Anglesey through the distribution of dividends. However, in December 2009, we received a $.6 million insurance settlement payment for the loss of premium on the sale of our share of value added aluminum products resulting from the interruption of production caused by the fire.

     Hedging. Our pricing of fabricated aluminum products, as discussed above, is generally intended to lock-in a conversion margin (representing the value added from the fabrication process(es)) and to pass metal price risk on to our customers. However, in certain instances we do enter into firm price arrangements. In such instances, we have price risk on our anticipated primary aluminum purchases in respect of the customer’s order. As such, whenever our Fabricated Products segment enters into a firm price contract, our Hedging business unit and Fabricated Products segment enter into an “internal hedge” so that metal price risk resides in the Hedging business unit. Results from internal hedging activities between Fabricated Products and Hedging eliminate in consolidation. As more fully discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” during 2007, 2008 and the nine months period ended September 30, 2009, our net exposure to primary aluminum price risk at Anglesey offset a significant amount the volume of fabricated products shipments with underlying primary aluminum price risk. As such, we considered our access to Anglesey production overall to be a “natural” hedge against Fabricated Products firm metal-price risk. However, since the volume of fabricated products shipped under firm prices may not have matched up on a month-to-month basis with expected Anglesey-related primary aluminum shipments and to the extent that firm price contracts from our Fabricated Products segment exceeded the Anglesey related primary aluminum shipments, we used third party hedging instruments to minimize any net remaining primary aluminum price exposure existing at any time.

     As a result of the cessation of Anglesey’s smelting operations as of September 30, 2009 noted above, the “natural hedge” against primary aluminum price fluctuation created by our participation in the primary aluminum market was effectively eliminated. Accordingly, we deemed it appropriate to increase our hedging activities to limit exposure to such price risks, which may have an adverse effect on our financial position, results of operations and cash flows. Total fabricated product shipments for which we were subject to price risk were 163, 228 and 239 (in millions of pounds) during 2009, 2008 and 2007, respectively.

     In addition to conducting hedging activities in respect of our exposure to aluminum price risk, the Hedging business unit also conducted hedging activities in respect of our exposure to British Pound Sterling exchange rate relating to Anglesey’s smelting operations through September 30, 2009.

     All hedging activities are managed centrally on behalf of our business units to minimize transaction costs, to monitor consolidated net exposures and to allow for increased responsiveness to changes in market factors. Hedging activities are conducted in compliance with a policy approved by our Board of Directors, and hedging transactions are only entered into after appropriate approvals are obtained from our hedging committee (members of which include our chief executive officer and key financial officers).

     Corporate and Other. This business unit provides general and administrative support to our operations. The expenses incurred in this business unit are not allocated to our other operations.

Segment and Geographical Area Financial Information

     The information set forth in Note 15 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” regarding our GAAP reporting segment and geographical areas in which we operate is incorporated herein by reference.

Competition

     The fabricated aluminum industry is highly competitive. We concentrate our fabricating operations on highly engineered products for which we believe we have production capability, technical expertise, high product quality, and geographic and other competitive advantages. We differentiate ourselves from our competition by pursuing “Best in Class” customer satisfaction which is driven by quality, availability, price and service, including delivery performance. Our primary competition in the global heat treated flat-rolled products is Alcoa, Inc. and Rio Tinto Plc (through its ownership of Alcan’s fabricated aluminum products business). In the extrusion market, we compete with many regional participants as well as larger companies with national reach such as SAPA, Norsk Hydro ASA and Alcoa. Some of our competitors are substantially larger, have greater financial resources, and may have other strategic advantages, including more efficient technologies or lower raw material costs.

     Our fabricated aluminum products facilities are located in North America. To the extent our competitors have production facilities located outside North America, they may be able to produce similar products at a lower cost. We may not be able to adequately reduce costs to compete with these products. Increased competition could cause a reduction in our shipment volume and profitability or increase our expenditures, any one of which could have a material adverse effect on our results of operations.

     In addition, our fabricated aluminum products compete with products made from other materials, such as steel and composites, for various applications, including aircraft manufacturing. The willingness of customers to accept substitutions for aluminum and the ability of large customers to exert leverage in the marketplace to reduce the pricing for fabricated aluminum products could adversely affect our results of operations.

     For the heat treat plate and sheet products, new competition is limited by technological expertise that only a few companies have developed through significant investment in research and development. Further, use of plate and sheet in safety critical applications make quality and product consistency critical factors. Suppliers must pass a rigorous qualification process to sell to airframe manufacturers. Additionally, significant investment in infrastructure and specialized equipment is required to supply heat treat plate and sheet.

     Barriers to entry are lower for extruded and forged products, mostly due to the lower required investment in equipment. However, the products that we produce are somewhat differentiated from the majority of products sold by competitors. We maintain a competitive advantage by using application engineering and advanced process engineering to distinguish our company and our products. We believe our metallurgical expertise and controlled manufacturing processes enable superior product consistency.

Employees

     At December 31, 2009, we employed approximately 2,100 persons, of which approximately 2,040 were employed in our Fabricated Products segment and approximately 60 were employed in our corporate group, most of whom are located in our offices in Foothill Ranch, California.

     The table below shows each manufacturing and warehouse location, the primary union affiliation, if any, and the expiration date for the current union contract. As discussed below, union affiliations are with the United Steel, Paper and Foresting, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, AFL — CIO, CLC (“USW”) and International Association of Machinists (“IAM”).

				Contract
Location		Union		Expiration Date
Chandler, AZ		USW (1)		April 2012
Greenwood, SC		Non-union		—
Jackson, TN		Non-union		—
London, Ontario		USW Canada		Feb 2012
Los Angeles, CA		Teamsters		April 2012
Newark, OH		USW (2)		Sept 2010
Richland, WA		Non-union		—
Richmond (Bellwood), VA		USW/IAM		Nov 2010
Sherman, TX		IAM		Dec 2010
Spokane, WA		USW (2)		Sept 2010
Plainfield, IL		Teamsters		April 2010

     In 2006 we entered into a settlement with the USW regarding, among other things, pension and retiree medical obligations. Under the terms of the settlement, we agreed to adopt a position of neutrality regarding the unionization of any of our employees.

Environmental Matters

     We are subject to numerous environmental laws and regulations with respect to, among other things: air and water emissions and discharges; the generation, storage, treatment, transportation and disposal of solid and hazardous waste; and the release of hazardous or toxic substances, pollutants and contaminants into the environment. Compliance with these environmental laws is and will continue to be costly.

     Our continuing operations and certain of our former operations have subjected, and may in the future subject, us to fines or penalties for alleged breaches of environmental laws and to obligations to perform investigations or clean up of the environment. We may also be subject to claims from governmental authorities or third parties related to alleged injuries to the environment, human health or natural resources, including claims with respect to waste disposal sites, the clean up of sites currently or formerly used by us or exposure of individuals to hazardous materials. Any investigation, clean-up or other remediation costs, fines or penalties, or costs to resolve third-party claims, may be significant and could have a material adverse effect on our financial position, results of operations and cash flows.

     We have accrued, and will accrue as necessary, for costs relating to the above matters that are reasonably expected to be incurred based on available information. However, it is possible that actual costs may differ, perhaps significantly, from the amounts expected or accrued, and such differences could have a material adverse effect on our financial position, results of operations and cash flows. In addition, new laws or regulations, or changes to existing laws and regulations may occur, and we cannot assure you as to the amount that we would have to spend to comply with such new or amended laws and regulations or the effects that they would have on our financial position, results of operations and cash flows.

Legal Structure

     Our current corporate structure is summarized as follows:

	•		We directly own 100% of the issued and outstanding shares of capital stock of Kaiser Aluminum Investments Company, a Delaware corporation (“KAIC”), which functions as an intermediate holding company.
	•		KAIC owns 49% of the ownership interests of Anglesey and 100% of the ownership interests of each of:
			• Kaiser Aluminum Fabricated Products, LLC, a Delaware limited liability company (“KAFP”), which holds the assets and liabilities associated with our Fabricated Products business unit (excluding those assets and liabilities associated with our London, Ontario facility);

			• Kaiser Aluminum Canada Limited, an Ontario corporation, which holds the assets and liabilities associated with our London, Ontario facility;
			• DCO Management, LLC (formerly known as Kaiser Aluminum & Chemical Corporation, LLC), a Delaware limited liability company, which, as a successor by merger to Kaiser Aluminum & Chemical Corporation, holds our remaining non-operating assets and liabilities;
			• Kaiser Aluminium International, Inc., a Delaware corporation, which functions primarily as the seller of our products delivered outside the United States;
			• Trochus Insurance Co., Ltd., a corporation formed in Bermuda, which has historically functioned as a captive insurance company; and
			• Kaiser Aluminum France, SAS, a corporation formed in France for the primary purpose of engaging in market development and commercialization and distribution of our products in Western Europe.

Item 1A. Risk Factors

     This Item may contain statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. See Item 1. “Business — Forward-Looking Statements” for cautionary information with respect to such forward-looking statements. Such cautionary information should be read as applying to all forward-looking statements wherever they appear in this Report. Forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties. Actual results may vary from those in forward-looking statements as a result of a number of factors including those we discuss in this Item and elsewhere in this Report.

     In addition to the factors discussed elsewhere in this Report, the risks described below are those which we believe are the material risks we face. The occurrence of any of the events discussed below could significantly and adversely affect our business, prospects, financial condition, results of operations and cash flows as well as the trading price of our common stock.

   We have experienced and continue to experience the effects of unprecedented economic uncertainty.

     The U.S. and global economies have recently experienced and continue to experience a period of substantial uncertainty with wide-ranging effects, including:

	•		disruption in global financial markets that has reduced the liquidity available to us, our customers, our suppliers and the purchasers of products that materially affect demand for our products, including commercial airlines;
	•		a substantially weakened banking and financial system that creates ongoing risk and exposure to the impact of non-performance by banks committed to provide financing, hedging counterparties, insurers, customers and suppliers;
	•		extreme volatility in commodity prices that can materially impact the results of our hedging strategies, increase near term cash margin requirements, reduce the value of our inventories and borrowing base under our revolving credit facility and result in substantial non-cash charges as we adjust inventory values and mark-to-market our hedge positions;
	•		substantial reductions in consumer spending that reduce the demand for applications that use our products, including commercial aircraft, automobiles, trucks and trailers;
	•		the rapid destocking of inventory levels throughout the supply chain in response to reduced demand and increasing uncertainty, which destocking has only recently started to show some moderation;
	•		reduced customer demand under existing contracts resulting in customers limiting purchases to contractual minimum volumes, seeking relief from contractual obligations or breaching those obligations;
	•		ongoing risk that customers and suppliers may liquidate or seek protection under federal bankruptcy laws and reject existing contractual commitments;
	•		difficulty successfully executing our strategy of growth through acquisitions;

	•		the possibility of additional plant closures or workforce reductions in response to prolonged or increased reduction in demand for our products;
	•		pressure to reduce defense spending, which reductions could affect demand for our products used in defense applications, as the U.S. and foreign governments are faced with competing national priorities; and
	•		the inability to predict with any certainty the effectiveness and long term impact of economic stimulus plans.

     We are unable to predict the impact, severity and duration of these effects, any of which could have a material adverse impact on our financial position, results of operations and cash flows.

   We operate in a highly competitive industry.

     The fabricated products segment of the aluminum industry is highly competitive. Competition in the sale of fabricated aluminum products is based upon quality, availability, price and service, including delivery performance. Many of our competitors are substantially larger than we are and have greater financial resources than we do, and may have other strategic advantages, including aluminum smelting capacity providing a long term natural hedge that facilitates the offering of fixed price contracts without margin exposure, more efficient technologies or lower raw material costs. Our facilities are located in North America. To the extent that our competitors have or develop production facilities located outside North America, they may be able to produce similar products at a lower cost or sell those products at a lower price during periods when the currency exchange rates favor foreign competition or “dump” those products in violation of existing trade laws. We may not be able to adequately reduce our costs or prices to compete with these products. Increased competition could cause a reduction in our shipment volumes and profitability or increase our expenditures, any one of which could have a material adverse effect on our financial position, results of operations and cash flows.

   We depend on a core group of significant customers.

     In 2009, our largest fabricated products customer, Reliance, accounted for approximately 20% of our fabricated products net sales, and our five largest customers accounted for approximately 48% of our fabricated products net sales. If our existing relationships with significant customers materially deteriorate or are terminated and we are not successful in replacing lost business, our financial position, results of operations and cash flows could be materially and adversely affected. In addition, a prolonged or increasing downturn in the business or financial condition of any of our significant customers could cause any one or more of them to limit purchases to contractual minimum volumes, seek relief from contractual minimums or breach those obligations, all of which could materially and adversely affect our financial position, results of operations and cash flows.

Our industry is very sensitive to foreign economic, regulatory and political factors that may adversely affect our business.

     We import primary aluminum from, and manufacture fabricated products used in, foreign countries. We also own 49% of Anglesey, and will purchase aluminum from Anglesey for sale to third parties. Factors in the politically and economically diverse countries in which we operate or have customers or suppliers, including inflation, fluctuations in currency and interest rates, competitive factors, civil unrest and labor problems, could affect our financial position, results of operations and cash flows. Our financial position, results of operations and cash flows could also be adversely affected by:

	•		acts of war or terrorism or the threat of war or terrorism;
	•		government regulation in the countries in which we operate, service customers or purchase raw materials;
	•		the implementation of controls on imports, exports or prices;
	•		the adoption of new forms of taxation and duties;
	•		new forms of emission controls and tax, commonly known as “cap and trade”;
	•		the imposition of currency restrictions;
	•		the nationalization or appropriation of rights or other assets; and
	•		trade disputes involving countries in which we operate, service customers or purchase raw materials.

The aerospace industry is cyclical and downturns in the aerospace industry, including downturns resulting from acts of terrorism, could adversely affect our business.

     We derive a significant portion of our revenue from products sold to the aerospace industry, which is highly cyclical and tends to decline in response to overall declines in industrial production. The commercial aerospace industry is historically driven by the demand from commercial airlines for new aircraft. Demand for commercial aircraft is influenced by airline industry profitability, trends in airline passenger traffic, by the state of the U.S. and global economies and numerous other factors, including the effects of terrorism. In recent years, a number of major airlines have undergone chapter 11 bankruptcy and experienced financial strain from volatile fuel prices. The aerospace industry also suffered significantly in the wake of the events of September 11, 2001, resulting in a sharp decrease globally in new commercial aircraft deliveries and order cancellations or deferrals by the major airlines. Despite existing backlogs, continued financial instability in the industry, reduced liquidity, terrorist acts or the increased threat of terrorism may lead to reduced demand for new aircraft that utilize our products, which could adversely affect our financial position, results of operations and cash flows. The military aerospace industry is highly dependent on U.S. and foreign government funding; however, it is also driven by the effects of terrorism, a changing global political environment, U.S. foreign policy, regulatory changes, the retirement of older aircraft, technological improvements to new aircraft engines that increase reliability, and delays in the development or launch of new programs. The timing, duration and extent of upturns and downturns cannot be predicted with certainty. A future downturn or reduction in defense spending could have a material adverse effect on our financial position, results of operations and cash flows.

Reductions in defense spending for aerospace and non-aerospace military applications could substantially reduce demand for our products.

     Our products are used in a wide variety of military applications, including military jets, armored vehicles and ordinance. The funding of U.S. government programs is subject to congressional appropriations. Many of the programs in which we participate may extend several years; however these programs are normally funded annually. Changes in military strategy and priorities may affect current and future programs. Similarly, there is significant pressure to reduce defense spending as the U.S. and foreign governments are faced with competing national priorities. Reductions in defense spending would reduce the demand for our products and could adversely affect our financial position, results of operations and cash flows.

   Our customers may reduce their demand for aluminum products in favor of alternative materials.

     Our fabricated aluminum products compete with products made from other materials, such as steel and composites, for various applications. For instance, the commercial aerospace industry has used and continues to evaluate the further use of alternative materials to aluminum, such as composites, in order to reduce the weight and increase the fuel efficiency of aircraft. The willingness of customers to accept substitutions for aluminum or the ability of large customers to exert leverage in the marketplace to reduce the pricing for fabricated aluminum products could adversely affect the demand for our products, particularly our aerospace and high strength products, and thus adversely affect our financial position, results of operations and cash flows.

Extended or further downturns in the automotive and heavy duty truck and trailer industries could adversely affect our business.

     The demand for many of our general engineering and custom products is dependent on the production of cars, light trucks, SUVs, and heavy duty vehicles and trailers in North America. The automotive industry is highly cyclical, as new vehicle demand is dependent on consumer spending and is tied closely to the overall strength of the North American economy. The North American automotive and heavy truck and trailer industries have experienced severe downturns in sales. Multiple production cuts by U.S. manufacturers may continue to adversely affect the demand for our products. Many North American automotive manufacturers and some of their first tier suppliers are also burdened with substantial structural costs, including pension and healthcare costs that impact their profitability and labor relations, that have resulted in severe financial difficulty, including bankruptcy, for several of them. A worsening of these companies’ financial condition or their bankruptcy could have further serious effects on the U.S. and global economies which, in turn, could worsen the conditions of the markets which directly affect the demand of our products. Similarly, a prolonged decline in the demand for new cars, light trucks, SUVs, and heavy duty vehicles and trailers, particularly in the U.S., could have a material adverse effect on our financial position, results of operations and cash flows.

   Changes in consumer demand may adversely affect our operations which supply automotive end users.

     Increases in energy costs have resulted in shifts in consumer demand away from motor vehicles that typically have a higher content of the products we currently supply, such as light trucks and SUVs. The loss of business with respect to, or a lack of commercial success of, one or more particular vehicle models for which we are a significant supplier could have an adverse impact on our financial position, results of operations and cash flows.

   We face tremendous pressure from our automotive customers on pricing.

     Cost cutting initiatives that our automotive customers have adopted generally result in increased downward pressure on pricing and our automotive customers typically seek agreements requiring reductions in pricing over the period of production. Pricing pressure may further intensify, particularly in North America, as North American automobile manufacturers continue to aggressively pursue cost cutting initiatives. If we are unable to generate sufficient production cost savings in the future to offset any required price reductions, our financial position, results of operations and cash flows could be adversely impacted.

Reductions in demand for our products may be more severe than, and may occur prior to reductions in demand for, our customers’ products.

     Customers purchasing our fabricated aluminum products, such as those in the cyclical automotive and aerospace industries, generally require significant lead time in the production of their own products. Therefore, demand for our products may increase prior to demand for our customers’ products. Conversely, demand for our products may decrease as our customers anticipate a downturn in their respective businesses. As demand for our customers’ products begins to soften, our customers typically reduce or eliminate their demand for our products and meet the reduced demand for their products using their own inventory without replenishing that inventory, which results in a reduction in demand for our products that is greater than the reduction in demand for their products. This amplified reduction in demand for our products in the event of a downturn in our customers’ respective businesses (de-stocking) may adversely affect our financial position, results of operations and cash flows.

Our business is subject to unplanned business interruptions which may adversely affect our business.

     The production of fabricated aluminum products and aluminum is subject to unplanned events such as explosions, fires, inclement weather, natural disasters, accidents, transportation interruptions and supply interruptions. Operational interruptions at one or more of our production facilities, particularly interruptions at our Trentwood facility in Spokane, Washington where our production of plate and sheet is concentrated, could cause substantial losses in our production capacity. Furthermore, because customers may be dependent on planned deliveries from us, customers that have to reschedule their own production due to our delivery delays may be able to pursue financial claims against us, and we may incur costs to correct such problems in addition to any liability resulting from such claims. Interruptions may also harm our reputation among actual and potential customers, potentially resulting in a loss of business. To the extent these losses are not covered by insurance, our financial position, results of operations and cash flows may be adversely affected by such events.

  Covenants and events of default in our debt instruments could limit our ability to undertake certain types of transactions and adversely affect our liquidity.

     Our revolving credit facility contains negative and financial covenants and events of default that may limit our financial flexibility and ability to undertake certain types of transactions. For instance, we are subject to negative covenants that restrict our activities, including restrictions on our ability to grant liens, engage in mergers, sell assets, incur debt, engage in different businesses, make investments, pay dividends, and repurchase shares. If we fail to satisfy the covenants set forth in our revolving credit facility or an event of default occurs under the revolving credit facility, we could be prohibited from borrowing. If we cannot borrow under the revolving credit facility, we could be required to seek additional financing, if available, or curtail our operations. Additional financing may not be available on commercially acceptable terms, or at all. If the revolving credit facility is terminated and we do not have sufficient cash on hand to pay any amounts outstanding under the facility, we could be required to sell assets or to obtain additional financing.

   We depend on our subsidiaries for cash to meet our obligations and pay any dividends.

     We are a holding company. Our subsidiaries conduct all of our operations and own substantially all of our assets. Consequently, our cash flow and our ability to meet our obligations or pay dividends to our stockholders depend upon the cash flow of our subsidiaries and the payment of funds by our subsidiaries to us in the form of dividends, tax sharing payments or otherwise. Our subsidiaries’ ability to provide funding will depend on their earnings, the terms of their indebtedness (including the revolving credit facility), tax considerations and legal restrictions.

   We may not be able to successfully implement our productivity and cost reduction initiatives.

     As the economy and markets for our products move through economic downturns or supply otherwise begins to exceed demand through increases in capacity or reduced demand, it is increasingly important for us to be a low cost producer. Although we have

undertaken and expect to continue to undertake productivity and cost reduction initiatives to improve performance, including deployment of company-wide business improvement methodologies, such as our production system, the Kaiser Production System, which involves the integrated utilization of application and advanced process engineering and business improvement methodologies such as Lean Enterprise, Total Productive Manufacturing and Six Sigma, we cannot assure you that all of these initiatives will be completed or beneficial to us or that any estimated cost saving from such activities will be fully realized. Even when we are able to generate new efficiencies successfully in the short to medium term, we may not be able to continue to reduce cost and increase productivity over the long term.

   Our business could be adversely affected by increases in the cost of raw materials and freight.

     The price of primary aluminum has historically been subject to significant cyclical price fluctuations, and the timing of changes in the market price of aluminum is largely unpredictable. Although our pricing of fabricated aluminum products is generally intended to pass the risk of price fluctuations on to our customers, we may not be able to pass on the entire cost of increases to our customers or offset fully the effects of higher costs for other raw materials through the use of surcharges and other measures, which may cause our profitability to decline. There will also be a potential time lag between increases in prices for raw materials under our purchase contracts and the point when we can implement a corresponding increase in price under our sales contracts with our customers. As a result, we may be exposed to fluctuations in raw material prices, including aluminum, since, during the time lag, we may have to bear the additional cost of the price increase under our purchase contracts. If these events were to occur, they could have a material adverse effect on our financial position, results of operations and cash flows. In addition, increases in raw material prices may cause some of our customers to substitute other materials for our products over time, adversely affecting our financial position, results of operations and cash flows due to a decrease in the sales of fabricated aluminum products.

   The price volatility of energy costs may adversely affect our business.

     Our income and cash flows depend on the margin above fixed and variable expenses (including energy costs) at which we are able to sell our fabricated aluminum products. The volatility in costs of fuel, principally natural gas, and other utility services, principally electricity, used by our production facilities affect operating costs. Fuel and utility prices have been, and will continue to be, affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets and the potential regulation of greenhouse gases. Future increases in fuel and utility prices may have a material adverse effect on our financial position, results of operations and cash flows.

Our hedging programs may limit the income and cash flows we would otherwise expect to receive if our hedging program were not in place and may otherwise affect our business.

     From time to time in the ordinary course of business, we enter into hedging transactions to limit our exposure to price risks relating to primary aluminum prices, energy prices and foreign currency. To the extent that these hedging transactions fix prices or exchange rates and primary aluminum prices, energy costs or foreign exchange rates are below the fixed prices or rates established by these hedging transactions, our income and cash flows will be lower than they otherwise would have been. Additionally, to the extent that primary aluminum prices, energy prices and/or foreign currency exchange rates deviate materially and adversely from fixed, floor or ceiling prices or rates established by outstanding hedging transactions, we fail to satisfy the covenants, or an event of default occurs under the terms of the underlying documents, we could incur margin calls that could adversely impact our liquidity and result in a material adverse effect on our financial position, results of operations and cash flows. Conversely, we are exposed to risks associated with the credit worthiness of our hedging counterparties. Non-performance by a counterparty could have a material adverse effect on our financial position, results of operations and cash flows.

Uncertainty is expected to preclude recognition of future operating results of Anglesey and the distribution of dividends by Anglesey.

     Through the quarter ended September 30, 2009, Anglesey operated under a power agreement that provided sufficient power to sustain its smelting operations at near-full capacity. This power agreement expired at the end of September 2009, and, despite Anglesey’s efforts to find a sustainable alternative to its power supply needs, no sources of power were identified to allow for the uninterrupted continuation of smelting operations beyond the expiration date of the power contract. As a result, Anglesey fully curtailed its smelting operations as of September 30, 2009. Although Anglesey commenced remelt and casting operations during the fourth quarter of 2009, unless we can determine that current or future operating results from Anglesey will be recoverable, we will not recognize future operating results from Anglesey. The expected inability to recognize future operating results of Anglesey and the continued lack of dividend income from Anglesey will adversely affect our results of operations and cash flows, relative to our past performance.

We are exposed to fluctuations in foreign currency exchange rates and interest rates, as well as inflation and other economic factors in the countries in which we operate.

     Economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates in the countries in which we operate, could affect our revenues, expenses and results of operations. In particular, lower valuation of the U.S. dollar against other currencies, particularly the Canadian dollar, Euro and British Pound Sterling, may affect our profitability as some important raw materials are purchased in other currencies, while products generally are sold in U.S. dollars.

Our ability to keep key management and other personnel in place and our ability to attract management and other personnel may affect our performance.

     We depend on our senior executive officers and other key personnel to run our business and design our compensation programs to attract and retain key personnel and facilitate our ability to develop effective succession plans. The loss of any of these officers or other key personnel or failure to attract key personnel could materially and adversely affect our succession planning and operations. Competition for qualified employees among companies that rely heavily on engineering and technology is intense, and the loss of qualified employees or an inability to attract, retain and motivate additional highly skilled employees required for the operation and expansion of our business could hinder our ability to improve manufacturing operations, conduct research activities successfully or develop marketable products.

Our failure to maintain satisfactory labor relations could adversely affect our business.

     A significant number of our employees are represented by labor unions under labor contracts with varying durations and expiration dates, including labor contracts with the USW, covering five of our manufacturing locations. Employees represented by labor unions under labor contracts represented approximately 64% of our employees at December 31, 2009. In January 2010, we were successful in renegotiating the terms of a labor contract with the USW covering employees at our manufacturing locations in Newark, Ohio and Spokane, Washington and extending the term of such contract to September 2015. Contracts at six other manufacturing locations expire in 2010 through 2012. We may not be able to renegotiate or negotiate these or our other labor contracts on satisfactory terms. As part of any negotiation, we may reach agreements with respect to future wages and benefits that could materially and adversely affect our future financial position, results of operations and cash flows. In addition, negotiations could divert management attention or result in union-initiated work actions, including strikes or work stoppages, that could have a material adverse effect on our financial position, results of operations and cash flows. Moreover, the existence of labor agreements may not prevent such union-initiated work actions.

Our business is regulated by a wide variety of health and safety laws and regulations and compliance may be costly and may adversely affect our business.

     Our operations are regulated by a wide variety of health and safety laws and regulations. Compliance with these laws and regulations may be costly and could have a material adverse effect on our results of operations. In addition, these laws and regulations are subject to change at any time, and we can give you no assurance as to the effect that any such changes would have on our operations or the amount that we would have to spend to comply with such laws and regulations as so changed.

   Environmental compliance, clean up and damage claims may decrease our cash flow and adversely affect our business.

     We are subject to numerous environmental laws and regulations with respect to, among other things: air and water emissions and discharges; the generation, storage, treatment, transportation and disposal of solid and hazardous waste; and the release of hazardous or toxic substances, pollutants and contaminants into the environment. Compliance with these environmental laws is and will continue to be costly.

     Our continuing operations and certain of our former operations have subjected, and may in the future subject, us to fines, penalties and expenses for alleged breaches of environmental laws and to obligations to perform investigations or clean up of the environment. We may also be subject to claims from governmental authorities or third parties related to alleged injuries to the environment, human health or natural resources, including claims with respect to waste disposal sites, the clean up of sites currently or formerly used by us or exposure of individuals to hazardous materials. Any investigation, clean-up or other remediation costs, fines or penalties, or costs to resolve third-party claims may be significant and could have a material adverse effect on our financial position, results of operations and cash flows.

     We have accrued, and will accrue, for costs relating to the above matters that are reasonably expected to be incurred based on available information. However, it is possible that actual costs may differ, perhaps significantly, from the amounts expected or accrued. Similarly, the timing of those expenditures may occur faster than anticipated. These differences could have a material adverse effect on our financial position, results of operations and cash flows. In addition, new laws or regulations or changes to existing laws and regulations may occur, including government mandated green initiatives and limitations on carbon emissions, that increase the cost or complexity of compliance, including the increased regulation of greenhouse gas emissions. Difference in actual costs, the timing of payments for previously accrued costs and the impact of new laws and regulations may have a material adverse effect on our financial position, results of operations and cash flows.

New governmental regulation relating to greenhouse gas emissions may subject us to significant new costs and restrictions on our operations.

     Climate change is receiving increasing attention worldwide. Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which has led to significant legislative and regulatory efforts to limit greenhouse gas emissions. There are bills pending in Congress that would regulate greenhouse gas emissions through a cap-and-trade system under which emitters would be required to buy allowances to offset emissions of greenhouse gas. In addition, several states, including states where we have manufacturing plants, are considering various greenhouse gas registration and reduction programs. Certain of our manufacturing plants use significant amounts of energy, including electricity and natural gas, and certain of our plants emit amounts of greenhouse gas above certain minimum thresholds that are likely to be affected by existing proposals. Greenhouse gas regulation could increase the price of the electricity we purchase, increase costs for our use of natural gas, potentially restrict access to or the use of natural gas, require us to purchase allowances to offset our own emissions or result in an overall increase in our costs of raw materials, any one of which could significantly increase our costs, reduce our competitiveness in a global economy or otherwise negatively affect our business, operations or financial results. While future emission regulation appears likely, it is too early to predict how this regulation will affect our business, operations or financial results.

Other legal proceedings or investigations or changes in the laws and regulations to which we are subject may adversely affect our business.

     In addition to the matters described above, we may from time-to-time be involved in, or be the subject of, disputes, proceedings and investigations with respect to a variety of matters, including matters related to personal injury, employees, taxes and contracts, as well as other disputes and proceedings that arise in the ordinary course of business. It could be costly to address these claims or any investigations involving them, whether meritorious or not, and legal proceedings and investigations could divert management’s attention as well as operational resources, negatively affecting our financial position, results of operations and cash flows.

     Additionally, as with the environmental laws and regulations, the other laws and regulations which govern our business are subject to change at any time. Compliance with changes to existing laws and regulations could have a material adverse effect on our financial position, results of operations and cash flows.

     Product liability claims against us could result in significant costs and could adversely affect our business.

     We are sometimes exposed to warranty and product liability claims. While we generally maintain insurance against many product liability risks, a successful claim that is not insured, exceeds our available insurance coverage, or is no longer fully insured as a result of the insolvency of one or more of the underlying carriers could have a material adverse effect on our financial position, results of operations and cash flows.

   Our rod, bar, and tube investment projects and other expansion projects may not be completed as scheduled.

     We are currently engaged in various investment projects, including investment in our rod, bar, and tube value stream to, among other things, develop and complete the start-up of a production facility in Kalamazoo, Michigan and various other expansion projects. Our ability to complete these projects, and the timing and costs of doing so, are subject to various risks associated with all major construction projects, many of which are beyond our control, including technical or mechanical problems, economic conditions and permitting. If we are unable to fully complete these projects or if the actual costs for these projects exceed our current expectations, our financial position, results of operations and cash flows could be adversely affected.

   We may not be able to successfully execute our strategy of growth through acquisitions.

     A component of our growth strategy is to acquire fabricated products assets in order to complement our product portfolio. Our ability to do so will be dependent upon a number of factors, including our ability to identify acceptable acquisition candidates, consummate acquisitions on favorable terms, successfully integrate acquired assets, obtain financing to fund acquisitions and support our growth and many other factors beyond our control. Risks associated with acquisitions include those relating to:

	•		diversion of management’s time and attention from our existing business;
	•		challenges in managing the increased scope, geographic diversity and complexity of operations;
	•		difficulties integrating the financial, technological and management standards, processes, procedures and controls of the acquired business with those of our existing operations;
	•		liability for known or unknown environmental conditions or other contingent liabilities not covered by indemnification or insurance;
	•		greater than anticipated expenditures required for compliance with environmental or other regulatory standards or for investments to improve operating results;
	•		difficulties achieving anticipated operational improvements;
	•		incurrence of indebtedness to finance acquisitions or capital expenditures relating to acquired assets; and
	•		issuance of additional equity, which could result in further dilution of the ownership interests of existing stockholders.

     We may not be successful in acquiring additional assets, and any acquisitions that we do consummate may not produce the anticipated benefits or may have adverse effects on our financial position, results of operations and cash flows.

   Our effective income tax rate could increase and materially adversely affect our business.

     We operate in multiple tax jurisdictions and pay tax on our income according to the tax laws of these jurisdictions. Various factors, some of which are beyond our control, determine our effective tax rate and/or the amount we are required to pay, including changes in or interpretations of tax laws in any given jurisdiction, our ability to use net operating losses and tax credit carry forwards and other tax attributes, changes in geographical allocation of income and expense, and our judgment about the realizability of deferred tax assets. Such changes to our effective tax rate could materially adversely affect our financial position, liquidity, results of operations and cash flows.

   Exposure to additional income tax liabilities due to audits could materially adversely affect our business.

     Due to our size and the nature of our business, we are subject to ongoing reviews by taxing jurisdictions on various tax matters, including challenges to various positions we assert on our income tax and withholding tax returns. We accrue income tax liabilities and tax contingencies based upon our best estimate of the taxes ultimately expected to be paid after considering our knowledge of all relevant facts and circumstances, existing tax laws, our experience with previous audits and settlements, the status of current tax examinations and how the tax authorities view certain issues. Such amounts are included in taxes payable or other non-current liabilities, as appropriate, and updated over time as more information becomes available. We record additional tax expense in the period in which we determine that the recorded tax liability is less than the ultimate assessment we expect. We are currently subject to audit and review in a number of jurisdictions in which we operate and have been advised that further audits may commence in the next 12 months.

   We are exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act of 2002.

     We are required to comply with Section 404 of the Sarbanes-Oxley Act of 2002. While we have concluded that at December 31, 2009, we have no material weaknesses in our internal controls over financial reporting we cannot assure you that we will not have a material weakness in the future. A “material weakness” is a control deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. If we fail to maintain a system of internal controls over financial reporting that meets the requirements of Section 404, we might be subject to sanctions or investigation by regulatory authorities such as the SEC or by the Nasdaq Stock Market LLC. Additionally, failure to comply with Section 404 or the report by us of a material weakness may cause investors to lose confidence in our financial statements and our stock price may be adversely affected. If we fail to remedy any material weakness, our financial

statements may be inaccurate, we may be subject to increase in insurance costs, we may not have access to the capital markets, and our stock price may be adversely affected.

   We may not be able to adequately protect proprietary rights to our technology.

     Our success will depend in part upon our proprietary technology and processes. Although we attempt to protect our intellectual property through patents, trademarks, trade secrets, copyrights, confidentiality and nondisclosure agreements and other measures, these measures may not be adequate particularly in foreign countries where the laws may offer significantly less intellectual property protection than is offered by the laws of the United States. In addition, any attempts to enforce our intellectual property rights, even if successful, could result in costly and prolonged litigation, divert management’s attention and adversely affect our results of operations and cash flows. The unauthorized use of our intellectual property may adversely affect our results of operations as our competitors would be able to utilize such property without having had to incur the costs of developing it, thus potentially reducing our relative profitability. Furthermore, we may be subject to claims that our technology infringes the intellectual property rights of another. Even if without merit, those claims could result in costly and prolonged litigation, divert management’s attention and adversely affect our results of operations and cash flows. In addition, we may be required to enter into licensing agreements in order to continue using technology that is important to our business. However, we may be unable to obtain license agreements on acceptable terms, which could negatively affect our financial position, results of operations and cash flows.

   We may not be able to utilize all of our net operating loss carry-forwards.

     We have net operating loss carry-forwards and other significant U.S. tax attributes that we believe could offset otherwise taxable income in the United States. The net operating loss carry-forwards available in any year to offset our net taxable income will be reduced following a more than 50% change in ownership during any period of 36 consecutive months (an “ownership change”) as determined under the Internal Revenue Code of 1986 (the “Code”). We entered into a stock transfer restriction agreement with our largest stockholder, a voluntary employee’s beneficiary association, or “VEBA”, that provides benefits for certain eligible retirees represented by certain unions and their spouses and eligible dependents (which we refer to as the “Union VEBA”), and our certificate of incorporation was amended to prohibit and void certain transfers of our common stock. Both reduce the risk that an ownership change will jeopardize our net operating loss carry-forwards. Because U.S. tax law limits the time during which carry-forwards may be applied against future taxes, we may not be able to take full advantage of the carry-forwards for federal income tax purposes. In addition, federal and state tax laws pertaining to net operating loss carry-forwards may be changed from time to time such that the net operating loss carry-forwards may be reduced or eliminated. If the net operating loss carry-forwards become unavailable to us or are fully utilized, our future income will not be shielded from federal and state income taxation, and the funds otherwise available for general corporate purposes would be reduced.

   Transfer restrictions and other factors could hinder the market for our common stock.

     In order to reduce the risk that an ownership change would jeopardize the preservation of our U.S. federal income tax attributes, including net operating loss carry-forwards, for purposes of Sections 382 and 383 of the Code, we entered into a stock transfer restriction agreement with our largest stockholder, the Union VEBA, and amended and restated our certificate of incorporation to include restrictions on transfers involving 5% ownership. These transfer restrictions may make our stock less attractive to large institutional holders, discourage potential acquirers from attempting to take over our company, limit the price that investors might be willing to pay for shares of our common stock and otherwise hinder the market for our common stock.

We could engage in or approve transactions involving our common shares that inadvertently impair the use of our federal income tax attributes.

     Section 382 of the Code affects our ability to use our federal income tax attributes, including our net operating loss carry-forwards, following a more than 50% change in ownership during any period of 36 consecutive months, an ownership change, as determined under the Code. Certain transactions may be included in the calculation of an ownership change, including transactions involving our repurchase or issuance of our common shares. When we engage in or approve any transaction involving our common shares that may be included in the calculation of an ownership change, our practice is to first perform the calculations necessary to confirm that our ability to use our federal income tax attributes will not be affected. These calculations are complex and reflect certain necessary assumptions. Accordingly, it is possible that we could approve or engage in a transaction involving our common shares that causes an ownership change and inadvertently impair the use of our federal income tax attributes.

   We could engage in or approve transactions involving our common shares that adversely affect significant stockholders.

     Under the transfer restrictions in our certificate of incorporation, our 5% stockholders are, in effect, required to seek the approval of, or a determination by, our Board of Directors before they engage in transactions involving our common stock. We could engage in or approve transactions involving our common stock that limit our ability to approve future transactions involving our common stock by our 5% stockholders in accordance with the transfer restrictions in our certificate of incorporation without impairing the use of our federal income tax attributes. In addition, we could engage in or approve transactions involving our common stock that cause stockholders owning less than 5% to become 5% stockholders, resulting in those stockholders having to seek the approval of, or a determination by, our Board of Directors under our certificate of incorporation before they could engage in future transactions involving our common stock. For example, share repurchases reduce the number of our common shares outstanding and could cause a stockholder holding less than 5% to become a 5% stockholder even though it has not acquired any additional shares.

Our results may fail to meet investor expectations and the trading price of our stock may decline due to a variety of factors beyond our control.

     Our financial and operating results may be significantly below the expectations of public market analysts and investors and the price of our common stock may decline due to the factors beyond our control, including, among others:

	•		volatility in the spot market for primary aluminum and energy costs;
	•		changes in the volume, price and mix of the products we sell;
	•		our annual accruals for variable payment obligations to the Union VEBA and another VEBA that provides benefits for certain other eligible retirees and their surviving spouses and eligible dependents (which we refer to as the “Salaried VEBA”);
	•		non-cash charges including last-in, first-out, or “LIFO”, inventory charges and impairments, lower of cost or market valuation adjustments to inventory, mark-to-market gains and losses related to our derivative transactions and impairments of fixed assets and investments;
	•		U.S. and global economic conditions;
	•		unanticipated interruptions of our operations;
	•		variations in the maintenance needs for our facilities;
	•		unanticipated changes in our labor relations;
	•		cyclical aspects impacting demand for our products; and
	•		reductions in defense spending.

Our annual variable payment obligations to the Union VEBA and Salaried VEBA are linked with our profitability, which means that not all of our earnings will be available to our stockholders.

     We are obligated to make annual payments to the Union VEBA and Salaried VEBA calculated based on our profitability and therefore not all of our earnings will be available to our stockholders. The aggregate amount of our annual payments to these VEBAs is capped however at $20 million and is subject to other limitations. As a result of these payment obligations, our earnings and cash flows may be reduced. In connection with the renegotiation and entry of a labor agreement with the USW, we agreed to extend our obligation to make annual payments to the Union VEBA to September 30, 2017. Although our obligation to make annual payments to the Union VEBA terminates for periods beginning after September 30, 2017, the Union VEBA or other groups representing our current and future retired hourly employees may seek to extend our obligation beyond the termination date. Any such extension could have a material adverse effect on our financial position, results of operations and cash flows.

   A significant percentage of our stock is held by the Union VEBA which may exert significant influence over us.

     The Union VEBA owns approximately 24% of our outstanding common stock as of February 15, 2010. As a result, the Union VEBA has significant influence over matters requiring stockholder approval, including the composition of our Board of Directors. Further, to the extent that the Union VEBA and other substantial stockholders were to act in concert, they could potentially control any action taken by our stockholders. This concentration of ownership could also facilitate or hinder proxy contests, tender offers, open market purchase programs, mergers or other purchases of our common stock that might otherwise give stockholders the

opportunity to realize a premium over the then prevailing market price of our common stock or cause the market price of our common stock to decline. We cannot assure you that the interests of our major stockholders will not conflict with our interests or the interests of our other investors.

The USW has director nomination rights through which it may influence us, and USW interests may not align with our interests or the interests of our other investors.

     Pursuant to agreements between the Company and the USW, the USW has the right to nominate candidates which, if elected, would constitute 40% of our Board of Directors through September 30, 2015 at which time the USW is required to cause any director nominated by the USW to submit his or her resignation to our Board of Directors, which submission our Board of Directors may accept or reject in its discretion. As a result, the directors nominated by the USW have a significant voice in the decisions of our Board of Directors. It is possible that the USW may seek to extend the term of the agreement and its right to nominate board members beyond 2015.

Payment of dividends may not continue in the future and our payment of dividends and stock repurchases are subject to restriction.

     In June 2007, our Board of Directors initiated the payment of a regular quarterly cash dividend. A quarterly cash dividend has been paid in each subsequent quarter. The future declaration and payment of dividends, if any, will be at the discretion of the Board of Directors and will depend on a number of factors, including our results, financial condition, anticipated cash requirements, and ability to satisfy conditions reflected in our revolving credit facility. We can give no assurance that dividends will be declared and paid in the future. Our revolving credit facility, as amended on January 9, 2009, restricts our ability to pay any dividends and prohibits us from repurchasing our common shares. Under our revolving credit facility, we may pay cash dividends only if we maintain $100 million in borrowing availability and are not in default. In addition, our revolving credit facility, as amended, limits dividends during any fiscal year to an aggregate amount not to exceed $25 million.

Our certificate of incorporation includes transfer restrictions that may void transactions in our common stock effected by 5% stockholders.

     Our certificate of incorporation restricts the transfer of our equity securities if either (1) the transferor holds 5% or more of the fair market value of all of our issued and outstanding equity securities or (2) as a result of the transfer, either any person would become such a 5% stockholder or the percentage stock ownership of any such 5% stockholder would be increased. These restrictions are subject to exceptions set forth in our certificate of incorporation. Any transfer that violates these restrictions is void and will be unwound as provided in our certificate of incorporation.

Delaware law, our governing documents and the stock transfer restriction agreement we entered into as part of our Plan may impede or discourage a takeover, which could adversely affect the value of our common stock.

     Provisions of Delaware law, our certificate of incorporation and the stock transfer restriction agreement with the Union VEBA may discourage a change of control of our company or deter tender offers for our common stock. We are currently subject to anti-takeover provisions under Delaware law. These anti-takeover provisions impose various impediments to the ability of a third party to acquire control of us. Additionally, provisions of our certificate of incorporation and bylaws impose various procedural and other requirements, which could make it more difficult for stockholders to effect certain corporate actions. For example, our certificate of incorporation authorizes our Board of Directors to determine the rights, preferences and privileges and restrictions of unissued shares of preferred stock without any vote or action by our stockholders. As a result, our Board of Directors can authorize and issue shares of preferred stock with voting or conversion rights that could adversely affect the voting or other rights of holders of common stock. Our certificate of incorporation also divides our Board of Directors into three classes of directors who serve for staggered terms. A significant effect of a classified Board of Directors may be to deter hostile takeover attempts because an acquirer could experience delays in replacing a majority of directors. Moreover, stockholders are not permitted to call a special meeting. Our certificate of incorporation prohibits certain transactions in our common stock involving 5% stockholders or parties who would become 5% stockholders as a result of the transaction. In addition, we are party to a stock transfer restriction agreement with the Union VEBA which limits its ability to transfer our common stock. The general effect of the transfer restrictions in the stock transfer restriction agreement and our certificate of incorporation is to ensure that a change in ownership of more than 45% of our outstanding common stock cannot occur in any three-year period without the consent of our Board of Directors. These rights and provisions may have the effect of delaying or deterring a change of control of our company and may limit the price that investors might be willing to pay in the future for shares of our common stock.

Item 1B. Unresolved Staff Comments

     None.

Item 2. Properties

     The locations of the principal plants and other materially important physical properties relating to our Fabricated Products business unit are below:

Location		Square footage				Owned or Leased
Chandler, Arizona			93,000			Leased(1)
Greenwood, South Carolina			185,000			Owned
Jackson, Tennessee			310,000			Owned
Kalamazoo, Michigan			465,000			Leased(2)
London, Ontario (Canada)			265,000			Owned
Los Angeles, California			183,000			Owned
Newark, Ohio			1,293,000			Owned
Richland, Washington			45,000			Leased(3)
Richmond (Bellwood), Virginia			443,000			Owned
Plainfield, Illinois			80,000			Leased(4)
Sherman, Texas			313,000			Owned
Spokane, Washington			2,854,000			Owned/Leased(5)
Tulsa, Oklahoma			28,000			Owned (6)
Total			6,557,000

     Plants and equipment and other facilities are generally in good condition and suitable for their intended uses.

     Our corporate headquarters located in Foothill Ranch, California, is a leased facility consisting of 21,500 square feet at December 31, 2009. In November 2009, we amended the term of the existing lease agreement, effective January 2010, to expand the leased square footage to approximately 25,000 and to extend the term of the lease to June 2016.

     Our obligations under the revolving credit facility are secured by, among other things, liens on our U.S. production facilities. See Note 7 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for further discussion.

Item 3. Legal Proceedings

     None.

Item 4. Submission of Matters to a Vote of Security Holders

     No matters were submitted to a vote of our security holders during the fourth quarter of 2009.

     PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

     Our outstanding common stock is traded on the Nasdaq Global Select Market under the ticker symbol “KALU.”

     The following table sets forth the high and low sale prices of our common stock for each quarterly period for fiscal years 2008 and 2009:

		High				Low
Fiscal 2008
First quarter.		$	79.84			$	56.67
Second quarter		$	76.46			$	53.23
Third quarter.		$	55.49			$	41.89
Fourth quarter		$	43.00			$	15.01
Fiscal 2009
First quarter.		$	29.24			$	16.36
Second quarter		$	37.41			$	22.19
Third quarter.		$	41.65			$	29.76
Fourth quarter		$	43.59			$	33.15

Holders

     As of February 15, 2010, there were approximately 620 holders of record of our common stock.

Dividends

     Commencing June 2007, our Board of Directors initiated the declaration of regular quarterly cash dividends to holders of our common stock, including the holders of restricted stock. Such dividend declarations also resulted in the payment of dividend equivalents to the holders of certain restricted stock units and the holders of performance shares with respect to one half of the performance shares issued under our equity and performance incentive plan. Dividends declared were $.18 per common share per quarter until June 2008, at which time our Board of Directors increased the quarterly cash dividend to $.24 per common share per quarter. Total cash dividends (and dividend equivalents) paid in 2009, 2008 and 2007 were $.96 per share (or $19.6 million), $.84 per common share (or $17.2 million) and $.36 per common share (or $7.4 million), respectively.

     In January 2010, our Board of Director declared another quarterly cash dividend of $.24 per common share, or $4.9 million, to holders of record at the close of business on January 25, 2010, which was paid on or about February 12, 2010.

     Future declaration and payment of dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our results of operations, financial condition, cash requirements, future prospects and other factors. We can give no assurance that any dividends will be declared or paid in the future. Our revolving credit facility, as amended on January 9, 2009, restricts our ability to pay dividends. We may pay cash dividends only if we maintain $100 million in borrowing availability thereunder and are not in default or would not be in default as a result of the dividend payment, and such dividends cannot exceed $25 million during any fiscal year.

Stock Performance Graph

     The following graph compares the cumulative total shareholder return on the Company’s common stock with: (i) the Russell 2000, and (ii) the S&P SmallCap 600. The graph assumes (i) an initial investment of $100 as of July 7, 2006, the first day on which the Company’s common stock began trading on the Nasdaq Stock Market, and (ii) reinvestment of all dividends. The performance graph is not necessarily indicative of future performance of our stock price.

COMPARISON OF 42 MONTH CUMULATIVE TOTAL RETURN*
Among Kaiser Aluminum Corporation, The S&P Smallcap 600 Index
And The Russell 2000 Index

     

     Our performance graph reflects the cumulative return of (i) the Russell 2000, a broad equity market index of which we are a component and (ii) the S&P SmallCap 600. We elected to use the S&P SmallCap 600 index after determining that no published industry or line-of-business indices were closely enough related to our industry or business to provide a reasonable basis for comparison. Similarly, we determined that we could not identify comparables to include in a peer group that would provide a reasonable basis for comparison and that, as a result, an index consisting of companies with similar market capitalizations was appropriate.

Issuer Repurchases of Equity Securities

     In June 2008, our Board of Directors authorized the repurchase of up to $75 million of our common shares, with repurchase transactions to occur in open-market or privately negotiated transactions at such times and prices as management deemed appropriate and to be funded with our excess liquidity after giving consideration to internal and external growth opportunities and future cash flows. The program may be modified, extended or terminated by our Board of Directors at any time. All shares repurchased under this stock repurchase program were treated as treasury shares. In January 2009, we entered into an amendment to our revolving credit facility that prohibits us from repurchasing our common shares. As a result, we can no longer repurchase our common shares or withhold common shares to satisfy employee minimum statutory withholding obligations without lender approval.

Item 6. Selected Financial Data

     All financial statement information before July 1, 2006 relates to Kaiser before emergence from chapter 11 bankruptcy. There will be a number of differences between the financial statements before and after emergence that will make comparisons of future and past financial information difficult and may make it more difficult to assess our future prospects based on historical performance. For example, earnings (loss) per share and share information for the Predecessor may not be meaningful because, pursuant to our plan of reorganization, the equity interests in the Company’s existing stockholders were cancelled without consideration.

     In connection with our emergence from chapter 11 bankruptcy, we also made some changes to our accounting policies and procedures, including those made as part of the application of “fresh start” accounting as required by the American Institute of Certified Professional Accountants Statement of Position 90-7 (“SOP 90-7”), Financial Reporting by Entities in Reorganization Under the Bankruptcy Code. In general, our accounting policies are the same as or similar to those historically used to prepare our financial statements. In certain cases, however, we adopted different accounting principles for, or applied methodologies differently to, our post emergence financial statement information. For instance, we changed our accounting methodologies with respect to inventory accounting. While we still account for inventories on a last-in, first-out (“LIFO”) basis after emergence, we are applying LIFO differently than we did in the past. Specifically, we now view each quarter on a standalone basis for computing LIFO; in the past, we recorded LIFO amounts with a view to the entire fiscal year, which, with certain exceptions, tended to result in LIFO charges being recorded in the fourth quarter or second half of the year.

     The following table represents our selected financial data. The table should be read in conjunctions with Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Item 8. “Financial Statements and Supplementary Data” of this Report.

														Year Ended December 31, 2006
		Year				Year				Year				July 1, 2006								Year
		Ended				Ended				Ended				through				January 1, 2006				Ended
		December 31,				December 31,				December 31,				December 31,				to				December 31,
		2009				2008				2007				2006				July 1, 2006				2005
		(In millions of dollars, except shipments, average sales price and per share amounts)
Net sales		$	987.0			$	1,508.2			$	1,504.5			$	667.5			$	689.8			$	1,089.7
Income (loss) from continuing operations			70.5				(68.5	)			101.0				26.2				3,136.9				(1,112.7	)
Income from discontinued operations			—				—				—				—				4.3				363.7
Cumulative effect of accounting change			—				—				—				—				—				(4.7	)
Net income (loss)		$	70.5			$	(68.5	)		$	101.0			$	26.2			$	3,141.2			$	(753.7	)
Basic income (loss) per share:
Income (loss) from continuing operations		$	3.51			$	(3.45	)		$	4.91			$	1.31			$	39.37			$	(13.97	)
Income from discontinued operations			—				—				—				—				.05				4.57
Cumulative effect of accounting change			—				—				—				—				—				(.06	)
Net income (loss) per share		$	3.51			$	(3.45	)		$	4.91			$	1.31			$	39.42			$	(9.46	)
Diluted income (loss) per share:
Income (loss) from continuing operations		$	3.51			$	(3.45	)		$	4.91			$	1.30			$	39.37			$	(13.97	)
Income from discontinued operations			—				—				—				—				.05				4.57
Cumulative effect of accounting change			—				—				—				—				—				(.06	)
Net income (loss) per share		$	3.51			$	(3.45	)		$	4.91			$	1.30			$	39.42			$	(9.46	)
Shipments (mm lbs)			542.4				691.6				705.0				326.9				350.6				637.5
Average realized third party sales price (per lb)		$	1.82			$	2.18			$	2.13			$	2.04			$	1.97			$	1.71
Cash dividends declared per common share		$	.96			$	.66			$	.54			$	—			$	—			$	—
Capital expenditures, net of accounts payable		$	59.2			$	93.2			$	61.8			$	30.0			$	28.1			$	31.0
Depreciation expense		$	16.4			$	14.7			$	11.9			$	5.5			$	9.8			$	19.9

		December 31,
		2009				2008				2007				2006					2005
Total assets		$	1,085.5			$	1,145.4			$	1,165.2			$	655.4				$	1,538.9
Long-term borrowings, including amounts due within one year			7.0				43.0				—				50.0					1.2

     In addition to the operational results discussed in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” significant items that impacted the financial results included, but were not limited to, the following:

     2009:

	•		We recorded $80.5 million of non-cash, pre-tax, unrealized mark to market gains on our derivative positions.
	•		We generated $127.7 million of cash from operations, repaid $36 million borrowed in 2008 under our revolving credit facility, and had no borrowings and $161.9 million of borrowing capacity (net of capacity used for letters of credit) under our revolving credit facility as of December 31, 2009.
	•		We paid dividends totaling $19.6 million in 2009.
	•		We recorded a $9.3 million lower of cost or market inventory adjustment in the first quarter of 2009 due to a decline in metal prices following December 31, 2008.
	•		We continued to fully impair our investment in Anglesey during the first half of 2009, resulting in impairment charges of $1.8 million. Anglesey fully curtailed its smelting operations at the end of September 30, 2009 and commenced remelt and casting operations in the fourth quarter of 2009. Due principally to a significant loss incurred by Anglesey during the third quarter of 2009, relating primarily to charges recorded for employee redundancy costs in connection with the cessation of its smelting operations, we suspended the use of the equity method of accounting commencing in the third quarter of 2009.
	•		In the first quarter of 2009, we incurred restructuring costs and other charges in connection with the closure of our Tulsa, Oklahoma facility. Such costs consisted principally of contract termination and facility shut-down costs. In the second quarter of 2009, we curtailed operations at our Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and shut down the Bellwood, Virginia facility temporarily during the month of July 2009, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. In addition, we reduced our personnel in certain other locations in the second quarter in an effort to streamline costs. In connection with these plans, we recorded restructuring costs and other charges of $5.4 million, principally related to involuntary employee termination and other personnel costs.

     2008:

	•		We recorded $87.1 million of non-cash, pre-tax, unrealized mark to market losses on our derivative positions primarily as a result of the decline in metal price.
	•		We recorded a $65.5 million lower of cost or market inventory adjustment due to the decline in metal prices. This inventory write-down lowered the LIFO inventory values that had been established at relatively high prices during the implementation of fresh start accounting in July 2006.
	•		In December 2008, we announced plans to close operations at our Tulsa, Oklahoma extrusion facility and significantly reduce operations at our Bellwood, Virginia facility in response to lower demand for products produced at these locations. These actions resulted in a restructuring charge of $8.8 million in the fourth quarter of 2008 related to employee termination benefits and asset impairment.

	•		Based on a review of new facts and circumstances that came into light during the fourth quarter of 2008 and early 2009 regarding Anglesey, we did not expect to be able to recover our investment in Anglesey, based on the expectation that Anglesey would fully curtail its smelting operations at the end of September 2009, when its power contract expired. As a result, we recorded an impairment charge of $37.8 million and a corresponding decrease to Investment in and advances to unconsolidated affiliate.
	•		On June 12, 2008, Anglesey suffered a significant failure in the rectifier yard that resulted in a localized fire in one of the power transformers. As a result of the fire, Anglesey was operating below its maximum capacity during the second half of 2008, returning to its normal production level in the fourth quarter of 2008. In December 2008, Anglesey received $20 million (approximately 14.0 million Pound Sterling) in a partial insurance settlement, of which $10 million was recorded as an increase in our equity in earnings and an increase in our investment in Anglesey. This amount was subsequently impaired at December 31, 2008.
	•		We announced a $75 million stock repurchase plan to commence after July 6, 2008. We repurchased 572,706 shares of common stock at a weighted-average price of $49.05 per share, or total cost of $28.1 million, under the repurchase plan. Our revolving credit facility, as amended on January 9, 2009, currently prohibits us from repurchasing our common shares, including under the repurchase plan.
	•		We began drawing down on our revolving credit facility during the last two quarters of 2008 and had $36.0 million of outstanding borrowings at December 31, 2008.
	•		We paid dividends totaling $17.2 million in 2008.

     2007:

	•		During the fourth quarter, we repaid our $50 million term loan.
	•		In June 2007, our Board of Directors initiated a regular quarterly dividend of $.18 per share. We paid total dividends of $7.4 million in 2007.
	•		In addition, in 2007 we determined that we met the “more likely than not” criteria for recognition of our deferred tax assets and we released the vast majority of the valuations allowance. At December 31, 2007, total assets included net deferred tax assets of $327.8 million.

     2006:

•

We emerged from chapter 11 bankruptcy on July 6, 2006 with our then-existing fabricated product facilities and operations and a 49% interest in Anglesey. During the period from January 1, 2006 to July 1, 2006, we recorded gains upon emergence and other reorganization related benefits (costs) of approximately $3.1 billion.

     2005:

	•		We were in chapter 11 bankruptcy for the entire year. During 2005, we recorded reorganization costs of approximately $1.2 billion.
	•		We also recorded a $4.7 million charge as a result of adopting accounting for conditional asset retirement obligations.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     This Annual Report on Form 10-K contains statements which constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements appear throughout this Report and can be identified by the use of forward-looking terminology such as “believes,” “expects,” “may,” “estimates,” “will,” “should,” “plans” or “anticipates” or the negative of the foregoing or other variations of comparable terminology, or by discussions of strategy. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary from those in the forward-looking statements as a result of various factors. These factors include: the effectiveness of management’s strategies and decisions; general economic and business conditions including cyclicality and other conditions in the aerospace, automobile and other end markets we serve; developments in technology; new or modified statutory or regulatory requirements; and changing prices and market conditions. This Item and Item 1A. “Risk Factors” each identify other

factors that could cause actual results to vary. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

     In accordance with Section 404 of the Sarbanes-Oxley Act of 2002, our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting and concluded that such control was effective as of December 31, 2009. Management’s report on the effectiveness of our internal control over financial reporting and the related report of our independent registered public accounting firm are included in Item 8. “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

     Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

	•		Overview
	•		Business Strategy and Core Philosophies
	•		Management Review of 2009 and Outlook for the Future
	•		Results of Operations
	•		Other Information
	•		Liquidity and Capital Resources
	•		Contractual Obligations, Commercial Commitments and Off-Balance-Sheet and Other Arrangements
	•		Critical Accounting Estimates
	•		New Accounting Pronouncements

     Our MD&A should be read in conjunction with the consolidated financial statements and related notes included in Item 8. “Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.

     Unless otherwise noted, this MD&A relates only to results from continuing operations. In the discussion of operating results below, certain items are referred to as non-run-rate items. For purposes of such discussion, non-run-rate items are items that, while they may recur from period to period, (i) are particularly material to results, (ii) affect costs primarily as a result of external market factors, and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of the users of the financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from items such as fluctuations in underlying metal prices, natural gas prices and currency exchange rates.

Overview

     We are a leading North American manufacturer of semi-fabricated specialty aluminum products for aerospace / high strength, general engineering and custom automotive and industrial applications. In addition, we own a 49% interest in Anglesey, which owns a facility in Holyhead, Wales that had operated as an aluminum smelter until September 30, 2009 and commenced remelt and casting of secondary aluminum products in the fourth quarter of 2009.

     We have one reportable segment, Fabricated Products. The Fabricated Products segment is comprised of our production facilities and sells value-added products such as heat treat aluminum sheet and plate, extrusions and forgings which are used in a wide range of industrial applications, including aerospace, defense, automotive and general engineering end-use applications. We also have three other business units which we combine into All Other. All Other is comprised of (i) all business activities relating to Anglesey’s smelting operations prior to the fourth quarter of 2009 and, thereafter, the purchase and sale of value-added secondary aluminum billet produced by Anglesey for which we receive a portion of a premium over normal commodity market prices, (ii) hedging activities in respect of our exposure to primary aluminum price risk and our exposure to British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations through September 30, 2009, and (iii) corporate and other activities, expenses of which are not allocated to other business units.

     Changes in global, regional, or country-specific economic conditions can have a significant impact on overall demand for aluminum-intensive fabricated products in the market segments in which we participate. Such changes in demand can directly affect our earnings by impacting the overall volume and mix of such products sold. Overall, demand for our fabricated products dramatically

declined in the final months of 2008 and the first half of 2009. Weak end-use demand, along with significant inventory de-stocking by our service center customers and others in the value stream adversely impacted our shipments. During 2007 and the first nine months of 2008, the markets for aerospace and high strength products in which we participate were comparatively strong, resulting in higher shipments and improved margins.

     Primary aluminum prices fell significantly over the course of the last half of 2008 and partially recovered beginning in the second quarter of 2009. The average LME transaction price per pound of primary aluminum for 2009, 2008 and 2007 was $.76, $1.17 and $1.20, respectively. At February 15, 2010, the LME transaction price per pound was $.92. The Company operates with an intent to remain neutral to primary aluminum price changes by passing on such price changes to its customers or, to the extent that it has firm price contracts, hedging such exposures to primary aluminum prices with counterparties.

     Our operating results are also, albeit to a lesser degree, sensitive to changes in prices for natural gas and changes in certain foreign exchange rates. All of the foregoing have been subject to significant price fluctuations over recent years. For a discussion of our sensitivity to changes in market conditions, see Item 7A. “Quantitative and Qualitative Disclosures About Market Risks - Sensitivity.”

Business Strategy and Core Philosophies

     We are a leading manufacturer of semi-fabricated specialty aluminum products. We specialize in providing highly engineered solutions that meet demanding requirements of the market segments we serve. We are leaders in our industry, maintaining a strong competitive position in a significant majority of the market segments we serve. In a very competitive marketplace, we distinguish ourselves with our “Best in Class” customer satisfaction and a broad product portfolio. Our blue-chip customer base includes some of the top names in industry, with whom we share long-standing relationships based on quality and trust. We have established a platform for growth that we believe is well positioned within the industry.

     We strive to reinforce our position as supplier of choice through “Best in Class” customer satisfaction and seek to continuously improve our cost performance in order to be a low cost producer by eliminating waste throughout the value chain.

     Our line of Kaiser Select^® products reflects a structured approach to reduce waste and variability for our customers. Our Kaiser Select^® products are manufactured according to strict specifications and are intended to deliver enhanced product characteristics with improved consistency that result in better performance and, in many cases, lower cost for our customers.

     Our lean enterprise initiative is facilitated by the Kaiser Production System (“KPS”), which is an integrated application of the tools of Lean Enterprise, Six Sigma and Total Productive Manufacturing which underpins our continuous effort to provide “Best in Class” customer satisfaction. We believe KPS enables us to deliver superior customer service through consistent, on-time delivery of superior quality products on short lead times. We are committed to imbedding KPS as the common culture through which we continuously improve our operations and enhance our total competitive position.

Management Review of 2009 and Outlook for the Future

     Overall Fabricated Products shipment volumes in 2009 declined significantly as compared to 2008, reflecting weak economic and end-market conditions for general engineering and automotive applications, exacerbated by significant inventory destocking by our distributor customers and others in the value chain. Inventory destocking of products for aerospace and high strength applications also occurred throughout the supply chain during 2009. Despite lower shipment volume, our emphasis in 2009 was to further strengthen our financial position and competitive advantage. We met these objectives by (i) generating cash from operations and ending the year virtually debt free, (ii) realigning inventories and other components of working capital, in light of weaker near-term demand, (iii) flexing our operations to lower demand, (iv) improving our manufacturing efficiencies and underlying cost performance, (v) introducing new Kaiser Select^® plate products, and (vi) continuing to invest in our new state-of-the-art casting and extrusion facility in Kalamazoo, Michigan.

     During 2009, our results reflected a 23% decrease in Fabricated Products shipment volume and a 13% decrease in Fabricated Products realized prices. The decrease in prices in our Fabricated Products segment primarily reflects the pass-through to customers of lower underlying hedged, alloyed metal prices. Value-added revenue per pound remained virtually unchanged as compared to 2008.

     Looking into 2010 and beyond, we see continued destocking by airframe manufacturers, but destocking by service center customers for our aerospace and high strength products appears to be abating. The net impact is that we expect our shipments for aerospace and high strength products to be slightly improved during the first half of 2010 from the average of the last three quarters of 2009. We expect demand for general engineering products to steadily improve with the industrial portion of the North American economy, and we are optimistic that destocking for these products has ended as service center inventories are at historically low levels.

Automotive demand is expected to improve approximately 35% relative to 2009, tracking improved North American automotive build rates that are nonetheless expected to remain substantially below historic levels. We anticipate our main areas of focus will be:

	•		launching our world class Kalamazoo, Michigan casting and extrusion facility with initial production in the first half of 2010 ramping up to full-scale production by year-end 2010;
	•		managing our capital structure to ensure proper levels of capital and liquidity to support growth initiatives;
	•		continuing to differentiate ourselves with additional Kaiser Select® products, “Best In Class” customer satisfaction, strong delivery performance, expanded product breadth, and broader geographic marketing presence; and
	•		continuing to improve the manufacturing efficiencies of our facilities to generate additional cost improvements over our performance in 2009.

Results of Operations

Fiscal 2009 Summary

	•		Net sales for the year ended December 31, 2009 decreased to $987.0 million compared to $1,508.2 million for the year ended December 31, 2008. The decrease reflected lower Fabricated Products segment shipment volume and realized prices as well as lower shipment volume and realized prices on sale of primary aluminum products in the Primary/Secondary business unit. The decrease in realized prices in our Fabricated Products segment reflects primarily the pass-through to customers of lower underlying hedged, alloyed metal prices while value-added revenue per pound remained virtually unchanged as compared to 2008. The decrease in shipment volume of primary aluminum products is due to the cessation of Anglesey’s smelting operation on September 30, 2009.
	•		Our operating income for the year ended December 31, 2009 was $118.7 million compared to an operating loss of $91.0 million for the year ended December 31, 2008. The 2009 operating income included significant items that we consider to be non-run-rate, which totaled $55.8 million. These items primarily included $80.5 million of non-cash mark to market gains on our derivative positions, $9.3 million of lower of cost or market inventory write-downs and $5.4 million of restructuring costs related primarily to employee termination costs. The 2008 operating loss also reflected significant items that we consider to be non-run-rate, which totaled $206.6 million. These items primarily included $87.1 million of unrealized mark to market losses on our derivative positions, $65.5 million of lower of cost or market inventory write-down, $37.8 million of impairment charges relating to our investment in Anglesey, and $8.8 million of restructuring costs and other charges in connection with the closure of our Tulsa, Oklahoma facility and the partial curtailment of our Bellwood, Virginia operation, of which $4.5 million was related to one time employee termination costs and $4.3 million was related to asset impairments (see further discussion of our operating income before non-run-rate in “Segment Information” below).
	•		Net income for the year ended December 31, 2009 was $70.5 million, as compared to a net loss of $68.5 million for the year ended December 31, 2008. The net income (loss) for 2009 and 2008 included all of the non-run-rate items discussed above.
	•		Our effective tax provision rate was 40.5% for the year ended December 31, 2009 (see discussion of “Provision (Benefit) for Income Taxes”).
	•		In 2009, we paid a total of approximately $19.6 million, or $.96 per common share, in cash dividends to stockholders, including holders of restricted stock, and in dividend equivalents to the holders of certain restricted stock units and the holders of performance shares with respect to one half of the performance shares.

Consolidated Selected Operational and Financial Information

     The table below provides selected operational and financial information on a consolidated basis (in millions of dollars, except shipments and prices) for 2009, 2008 and 2007.

     The following data should be read in conjunction with our consolidated financial statements and the notes thereto included in Item 8. “Financial and Supplementary Data.” See Note 15 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for further information regarding segments.

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
		(In millions of dollars, except shipments and average sales price)
Shipments (mm lbs):
Fabricated Products			428.5				558.5				547.8
All Other(1)			113.9				133.1				157.2
			542.4				691.6				705.0
Average Realized Third Party Sales Price (per pound):
Fabricated Products(2)		$	2.09			$	2.39			$	2.37
All Other(3)		$	.79			$	1.29			$	1.31
Net Sales:
Fabricated Products		$	897.1			$	1,336.8			$	1,298.3
All Other			89.9				171.4				206.2
Total Net Sales		$	987.0			$	1,508.2			$	1,504.5
Segment Operating Income (Loss):
Fabricated Products(4)(5)		$	78.2			$	53.5			$	169.0
All Other (6)			40.5				(144.5	)			13.0
Total Operating Income (Loss)		$	118.7			$	(91.0	)		$	182.0
Income tax provision (benefit)		$	48.1			$	(22.8	)		$	81.4
Net Income (Loss)		$	70.5			$	(68.5	)		$	101.0
Capital Expenditures, (net of accounts payable)		$	59.2			$	93.2			$	61.8

     Summary. We reported Net income of $70.5 million for 2009 compared to a Net loss of $68.5 million for 2008 and Net income of $101.0 million for 2007. Net income for 2009 includes the following pretax items: (i) a non-cash mark-to-market unrealized gain of $80.5 million on our derivative positions primarily as a result of the increase in metal prices in the latter half of 2009, (ii) a $9.3 million charge relating to lower of cost or market valuation of inventory and (iii) restructuring charges of $5.4 million primarily relating to the closure of our Tulsa, Oklahoma facility announced in 2008 and further curtailment of operations at our Bellwood, Virginia facility. All years include a number of other non-run-rate items that are more fully explained in the sections below.

     Net Sales. We reported Net sales of $987.0 million in 2009 as compared to $1,508.2 million in 2008 and $1,504.5 million in 2007. As more fully discussed below, the decrease in revenues in 2009 is primarily the result of a decrease in our Fabricated Products shipment volume and realized prices, and a decrease in Anglesey-related primary aluminum shipment volume and pricing. The decrease of shipment volume in our Fabricated Products segment is primarily due to weak economic and end-market conditions for general engineering and automotive applications, exacerbated by significant inventory destocking by our distributor customers and others in the supply chain, as well as inventory destocking of products for aerospace and high strength applications throughout the supply chain. The decrease in primary aluminum shipments through Anglesey is primarily due to the cessation of the smelting operation at Anglesey on September 30, 2009 (see “Segment Information-All Other” below). The decrease in Fabricated Products segment realized prices reflects primarily the pass-through to customers of lower underlying alloyed metal prices. Value-added revenue per pound remained virtually unchanged as compared to 2008 (see further discussion in “Segment Information-Fabricated Products” below).

     The increase in revenues from 2007 to 2008 is primarily the result of higher shipments and value-added pricing in Fabricated Products, offset by a decrease of shipments in primary aluminum through Anglesey due to a fire at Anglesey during the second quarter of 2008.

     Cost of Products Sold, excluding Depreciation and Other Items. Cost of goods sold, excluding depreciation in 2009 totaled $766.4 million, or 78% of net sales, as compared to $1,400.7 million, or 93% of net sales, in 2008. The decrease in Cost of products sold, excluding depreciation as a percentage of net sales in 2009 was primarily the result of mark-to-market unrealized gains (losses) of $80.5 million and $(87.1) million on our derivative positions in 2009 and 2008, respectively (see further discussion in “Segment Information-Fabricated Products” below).

     Cost of goods sold, excluding depreciation in 2008 totaled $1,400.7 million, or 93% of net sales, compared to $1,251.1 million, or 83% of net sales, in 2007. The increase in Cost of products sold, excluding depreciation as a percentage of net sales in 2008 was primarily the result of a mark-to-market unrealized loss of $87.1 million on our derivative positions. Additionally, increases in energy, freight, currency exchange, major maintenance expense, and other manufacturing costs increased the Cost of products sold, excluding depreciation as a percentage of net sales in 2008 (see further discussion in “Segment Information-Fabricated Products” below).

     Lower of Cost or Market Inventory Write-down. We recorded lower of cost or market inventory write-downs of $9.3 million and $65.5 million in 2009 and 2008, respectively, as a result of declining metal prices.

     Impairment of Investment in Anglesey. In 2008, we recorded a charge of $37.8 million to fully impair our 49% equity investment in Anglesey, in anticipation of the cessation of its smelting operations on September 30, 2009. In the first half of 2009, we recorded $1.8 million in equity in income, which we subsequently impaired to maintain our investment balance at zero. For the quarters ended September 30, 2009 and December 31, 2009, no additional impairment charges were recorded, due to the suspension of the equity method of accounting, as more fully described in Note 3 of Notes to Consolidated Financial statements included in Item 8. “Financial Statements and Supplementary Data.”

     Restructuring Costs and Other Charges. In December 2008, we announced plans to close our Tulsa, Oklahoma facility and to curtail operations at our Bellwood, Virginia facility. We recorded $8.8 million of restructuring charges and other costs in 2008 in connection with such plans. In 2009, we recorded $5.4 million of restructuring charges and other costs comprised of: (i) $.8 million of additional charges in connection with our 2008 plans to close our Tulsa, Oklahoma facility and curtail operations at Bellwood, Virginia and (ii) $4.6 million in connection with plans announced in the second quarter of 2009 to further curtail operations at our Bellwood, Virginia facility. See Note 16 of Notes to Consolidated Financial statements included in Item 8. “Financial Statements and Supplementary Data” for further information regarding our 2008 and 2009 restructuring plans.

     Depreciation and Amortization. Depreciation and amortization for 2009 was $16.4 million compared to $14.7 million in 2008 and $11.9 million for 2007. Increases in depreciation expense from 2007 to 2008 and from 2008 to 2009 were the result of Construction in progress being placed into production throughout the second half of 2007 and 2008 primarily in relation to the various expansion projects, including the expansion project at our Trentwood facility in Spokane, Washington.

     Selling, Administrative, Research and Development, and General. Selling, administrative, research and development, and general expense totaled $69.9 million in 2009 as compared to $73.1 million in both 2008 and 2007. The decrease in selling, administrative, research and development and general expenses for 2009 as compared to 2008 is principally due to: (i) the net reductions in administrative expense within All Other (See “Segment Information—All Other” below) and (ii) overhead cost reductions in the Fabricated Products segment.

     Other Operating (Benefits) Charges, Net. Included within Other operating (benefits) charges, net (in millions of dollars) for 2009, 2008, and 2007, were the following:

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Alternative minimum tax (“AMT”) reimbursement (1)		$	—			$	—			$	(7.2	)
Professional fees			—				—				(1.1	)
Bad debt recoveries relating to pre-emergence write-offs			(.9	)			(1.6	)			—
Pension Benefit Guaranty Corporation (“PBGC”) settlement (2)			—				—				(1.3	)
Non-cash benefit resulting from settlement of a $5.0 claim by the purchaser of the Gramercy, Louisiana alumina refinery and Kaiser Jamaica Bauxite Company for payment of $.1			—				—				(4.9	)
Resolution of contingencies relating to sale of property prior to emergence (3)			—				—				(1.6	)
Post emergence Chapter 11 — related items (4)			—				.2				2.6
Other			—				—				(.1	)
		$	(.9	)		$	(1.4	)		$	(13.6	)

     Interest Expense. Interest expense was zero in 2009 compared with $1.0 million in 2008 and $4.3 million in 2007. The change in expense from 2008 to 2009 is primarily due to $2.7 million of interest capitalization on Construction in progress therefore reducing interest expense in 2009 to zero. The decrease in expense from 2007 to 2008 is primarily the result of the repayment of our term loan during the fourth quarter of 2007.

     Other Income (Expense) — Net. Other income (expense) — net was a charge of $.1 million in 2009 compared with a benefit of $.7 million in 2008 and a benefit of $4.7 million in 2007. The decrease from 2008 to 2009 was primarily due to lower interest income as the result of lower interest rates. The decrease from 2007 to 2008 was primarily due to a decrease in interest income of $3.6 million as a result of lower interest earning cash balances during 2008.

     Provision (Benefit) for Income Taxes. The income tax provision for 2009 was $48.1 million, or an effective tax rate of 40.5%. The difference between the effective tax rate and the projected blended statutory tax rate for 2009 was primarily related to the following:

•

Impact of a non-deductible compensation expense, resulted in an increase to the income tax provision of $4.7 million, and increased the blended statutory tax provision rate by approximately 3.9%;

	•		Decrease in the valuation allowance for certain federal and state net operating losses, state tax rate adjustments and federal general business tax credits, which resulted in a decrease to the income tax provision of $2.9 million and a decrease to the blended statutory tax provision rate of 2.4%;
	•		Unrecognized tax benefits, including interest and penalties, increased the income tax provision by $1.3 million and the blended statutory tax provision rate by approximately 1.1%; and
	•		The foreign currency impact on unrecognized tax benefits, interest and penalties resulted in a $2.7 million currency translation adjustment that was recorded in Accumulated other comprehensive income.

     Our effective tax benefit rate was 25.0% for 2008. The tax benefit from the United States pre-tax book loss was partially offset by the tax provision for Canada and United Kingdom relating to Anglesey resulting in a blended statutory tax benefit rate of 39.6%. The difference between the effective tax benefit rate and the blended statutory tax benefit rate for 2008 was primarily due to the following factors: (i) increase in the valuation allowance for certain federal and state net operating losses, state tax rate adjustments and the impairment related to Anglesey resulted in $7.1 million being included in the income tax provision, decreasing the blended statutory tax benefit rate by approximately 7.7%, (ii) our equity in income before income taxes of Anglesey is treated as a reduction (increase) in Cost of products sold excluding depreciation, and because the income tax effects of our equity in income are included in the tax provision, $3.5 million was included in the income tax provision, decreasing the blended statutory tax benefit rate by approximately 3.8%, (iii) unrecognized tax benefits, including interest and penalties, decreased the income tax benefit by $2.4 million and the blended statutory tax benefit rate by approximately 2.7%, and (iv) the foreign currency impact on unrecognized tax benefits, interest and penalties resulted in a $5.2 million currency translation adjustment that was recorded in Accumulated other comprehensive income.

     Our effective income tax rate was 44.6% for 2007. The high effective tax rate for 2007 was impacted by several factors including (i) the income tax effects of our equity in income of Anglesey, which impacted the provision by $12.9 million, (ii) benefits associated with changes in the tax valuation allowance of $62.2 million were recorded as adjustments to Stockholders’ equity and not reflected in the tax provision, increasing the effective tax rate, (iii) the impact of unrecognized tax benefits, including interest and penalties, which increased the tax provision by approximately $3.0 million, and (iv) a favorable geographic distribution of income.

Derivatives

     In conducting our business, we, from time-to-time, enter into derivative transactions, including forward contracts and options, to limit our economic (i.e., cash) exposure resulting from (i) metal price risk related to our sales of fabricated aluminum products and the purchase of metal used as raw materials for our fabrication operations, (ii) the energy price risk from fluctuating prices for natural gas used in our production process, and (iii) foreign currency requirements with respect to cash commitments for equipment purchases and with respect to our foreign subsidiaries and affiliate. As our hedging activities are generally designed to lock-in a specified price or range of prices, realized gains or losses on the derivative contracts utilized in the hedging activities generally offset at least a portion of any losses or gains, respectively, on the transactions being hedged at the time the transactions occur. However, due to mark-to-market accounting, during the term of the derivative contract, significant unrealized, non-cash gains and losses may be recorded in the income statement as a reduction or increase in Cost of products sold, excluding depreciation, amortization and other items. We may also be exposed to margin calls placed on derivative contracts, which we try to minimize or offset through counterparty credit lines and/or the use of options. From time to time, we may modify the terms of the derivative contracts based on operational needs.

     The fair value of our derivatives recorded on the Consolidated Balance Sheets at December 31, 2009 and December 31, 2008 was a net asset of $16.5 million and a net liability of $59.6 million, respectively. The primary reasons for the increase in the net position were settlements of derivatives during 2009, giving rise to realized losses of $52.6 million for the period, the increase in metal prices and natural gas prices, the effect of changes in outstanding foreign currency hedge positions, and changes in foreign currency rates compared to December 31, 2008. The settlement of derivatives and changes in market value of contracts resulted in the recognition of $80.5 million of unrealized mark-to-market gains on derivatives, which we consider to be a non-run-rate item (see Note 12 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplemental Data.”)

Fair Value Measurement

     We apply the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, in measuring the fair value of our derivative contracts and the fair value of our Canadian pension plan assets and the plan assets of the VEBAs.

     Our derivative contracts are valued at fair value using significant observable and unobservable inputs. Such financial instruments consist of primary aluminum, natural gas, and foreign currency contracts. The fair values of a majority of these derivative contracts are based upon trades in liquid markets. Valuation model inputs can generally be verified and valuation techniques do not involve

significant judgment. The fair values of such financial instruments are generally classified within Level 2 of the fair value hierarchy. We have some derivative contracts that do not have observable market quotes. For these financial instruments, we use significant other observable inputs (i.e., information concerning regional premiums for swaps). Where appropriate, valuations are adjusted for various factors, such as bid/offer spreads.

     In determining the fair value of plan assets, the Company utilizes primarily the results of valuations supplied by the investment advisors responsible for managing the assets of each plan. Certain plan assets are valued based upon unadjusted quoted market prices in active markets that are accessible at the measurement date for identical, unrestricted assets (e.g., liquid securities listed on an exchange). Such assets are classified within Level 1 of the fair value hierarchy. Valuation of other invested plan assets is based on significant observable inputs (e.g., net asset values of registered investment companies, valuations derived from actual market transactions, broker-dealer supplied valuations, or correlations between a given U.S. market and a non-U.S. security). Valuation model inputs can generally be verified and valuation techniques do not involve significant judgment. The fair values of such financial instruments are classified within Level 2 of the fair value hierarchy.

Restructuring Activities

     In December 2008, we announced plans to close operations at our Tulsa, Oklahoma facility and significantly reduce operations at our Bellwood, Virginia facility. The Tulsa and the Bellwood facilities produced primarily extruded rod and bar products sold principally to service centers for general engineering applications. The operations and workforce reductions were a result of deteriorating economic and market conditions. Approximately 45 employees at the Tulsa, Oklahoma facility and 125 employees at the Bellwood, Virginia facility were affected. As a result, we incurred restructuring costs and other charges of $8.8 million during the fourth quarter of 2008, of which $4.5 million was related to involuntary employee terminations and $4.3 million was related to asset impairments. During 2009, we recorded additional charges of $.8 million in connection with these restructuring efforts, consisting primarily of contract termination and facility shut-down costs. Approximately $.3 million of such expense represented cash obligations, with the balance represented by non-cash charges. The restructuring efforts initiated during the fourth quarter of 2008 were substantially completed by the first quarter of 2009.

     In May 2009, we announced plans to further curtail operations at our Bellwood, Virginia facility to focus solely on drive shaft and seamless tube products and shut down the Bellwood, Virginia facility temporarily during the month of July 2009, in response to planned shutdowns in the automotive industry and continued weak economic and market conditions. In addition, we reduced our personnel in certain other locations in the quarter ended June 30, 2009, in an effort to streamline costs. Approximately 85 employees were affected by the reduction in force, principally at the Bellwood, Virginia location. In connection with the foregoing plans, we recorded restructuring costs and other charges of $4.6 million of which $4.3 million were related to involuntary employee terminations and other personnel costs, and the remaining $.3 million were principally related to a non-cash asset impairment. Of the personnel-related costs incurred, approximately $.8 million represented incremental non-cash expense, in connection with the accelerated vesting of previously granted stock-based payments. The restructuring efforts initiated during the second quarter of 2009 were substantially completed by the end of 2009.

     The following table summarizes the activity relating to cash obligations (in millions) arising from the Company’s restructuring plans:

		Employee				Facility-
		Termination				Related
		Costs				Costs				Total
Restructuring obligations at December 31, 2007		$	—			$	—			$	—
Cash restructuring costs and other charges incurred in 2008			4.5				—				4.5
Cash payments in 2008			—				—				—
Restructuring obligations at December 31, 2008			4.5				—				4.5
Cash restructuring costs and other charges incurred in 2009			3.3				.5				3.8
Cash payments in 2009			(5.5	)			(.5	)			(6.0	)
Restructuring obligations at December 31, 2009		$	2.3			$	—			$	2.3

     These restructuring activities reduced excess capacity in our manufacturing system in response to reduced demand in the general engineering and ground transportation end markets in late 2008 and 2009. Costs related to maintaining this excess capacity were

avoided during 2009. We continue to maintain adequate capacity throughout our operations capable of meeting customer needs and serving anticipated market demand in the core markets of extruded rod and bar, seamless tube, and automotive products.

Segment and Business Unit Information

     For the purposes of segment reporting under GAAP, we have one reportable segment, Fabricated Products. We also have three other business units which we combine into All Other. All Other is not considered a reportable segment. As described above, the Fabricated Products segment is comprised of our production facilities in North America which sell value-added, semi-fabricated specialty aluminum products such as heat treat sheet and plate, extrusions and forgings which are used in a wide range of industrial applications, including aerospace, defense, automotive and general engineering end-use applications. All Other is comprised of (i) Anglesey-related activities, including the smelting operations prior to September 30, 2009 and, thereafter, the purchase and sale of value-added secondary aluminum billet produced by Anglesey for which we receive a portion of a premium over normal commodity market prices recognized on a net basis as revenue, (ii) hedging activities in respect of our exposure to primary aluminum price risk and our exposure to British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations through September 30, 2009, and (iii) corporate and other activities, expenses of which are not allocated to other business units. The accounting policies of the segment are the same as those described in Note 1 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data.” Segment results are evaluated internally before interest expense, other expense (income) and income taxes.

     Fabricated Products

     The table below provides selected operational and financial information (in millions of dollars except shipments and average sales process) for our Fabricated Products segment for 2009, 2008 and 2007:

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Shipments (mm lbs)			428.5				558.5				547.8
Composition of average realized third-party sales price (per pound):
Hedged cost of alloyed metal		$	.89			$	1.19			$	1.20
Average realized third party value-added revenue		$	1.20			$	1.20			$	1.17
Average realized third party sales price		$	2.09			$	2.39			$	2.37
Net sales		$	897.1			$	1,336.8			$	1,298.3
Segment Operating Income		$	78.2			$	53.5			$	169.0

     For 2009, net sales of fabricated products decreased by 33% to $897.1 million, as compared to 2008, due primarily to a 23% decrease in shipments and a 13% decrease in average realized prices. Shipments of products for aerospace and high-strength applications in 2009 were 8% lower as compared to 2008 due to inventory destocking of products for aerospace and high strength applications throughout the supply chain during 2009, which was largely offset by higher contractual aerospace plate shipments. Shipments of general engineering products and automotive and custom industrial products in 2009 declined 29% as compared to 2008, reflecting weak economic and end-market conditions for general engineering and automotive applications, exacerbated by significant inventory destocking by our distributor customers and others in the value chain.

     The reduction in average realized prices reflected the pass through to customers of 25% lower underlying hedged alloyed metal prices. Value-added revenue per pound remained consistent from 2008.

     Net sales of fabricated products in 2008 increased by 3% to $1,336.8 million as compared to 2007, due primarily to a 2% increase in shipments and a 1% increase in average realized prices. Shipments of products for aerospace, high-strength and defense applications were slightly higher in 2008 as compared to 2007, reflecting continued strong demand for such products. Shipments of general engineering products were also higher as compared to 2007, but shipments for automotive and custom industrial products declined as compared to 2007. The increase in average realized price in 2008 as compared to 2007 was primarily due to higher realized value-added pricing.

     The table below provides shipment and value-added revenue information for our three end-use product groupings for 2009, 2008 and 2007 for our Fabricated Products segment:

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Shipments (mm lbs):
Aerospace and high strength products			144.8				157.7				155.0
General engineering products			189.0				258.1				245.8
All other products			94.7				142.7				147.0
			428.5				558.5				547.8
Value added revenue(1):
Aerospace and high strength products		$	278.0			$	323.8			$	297.4
General engineering products			164.7				248.9				225.3
All other products			70.7				99.8				116.5
		$	513.4			$	672.5			$	639.2
Value added revenue per pound:
Aerospace and high strength products		$	1.92			$	2.05			$	1.92
General engineering products			.87				.96				.92
All other products			.75				.70				.79
		$	1.20			$	1.20			$	1.17

Based on recent trends, management’s expectations for our Fabricated Products segment in 2010 include the following:

•

Aerospace and High Strength. We are optimistic about the long-term fundamentals of the aerospace industry and believe build rates of commercial aircraft will continue to be strong. While we believe destocking of inventory by service centers of aerospace and high strength products is abating, we expect destocking by airframe manufacturers to continue in the near-term. The net impact is that we expect our shipments for aerospace and high strength products to be slightly improved during the first half of 2010 from the average of the last three quarters of 2009 while the airframe manufacturers work through their inventory overhang.

•

General Engineering. We expect demand for general engineering products to steadily improve with the industrial portion of the North American economy, and we are optimistic that destocking for these products has ended as service center inventories are at historic low levels.

•

Custom Automotive and Industrial Products. Automotive demand is expected to improve 35% relative to 2009, tracking improved North American automotive build rates that are nonetheless expected to remain substantially below historic levels.

     Operating income for 2009, 2008 and 2007 includes non-run-rate items. Non-run-rate items to us are items that, while they may recur from period to period, (i) are particularly material to results, (ii) affect costs primarily as a result of external market factors, and (iii) may not recur in future periods if the same level of underlying performance were to occur. Non-run-rate items are part of our business and operating environment but are worthy of being highlighted for the benefit of the users of the financial statements. Our intent is to allow users of the financial statements to consider our results both in light of and separately from fluctuations in underlying metal prices, natural gas prices and currency exchange rates. These items are listed below (in millions of dollars):

		Year Ended December 31,
		2009				2008				2007
Segment operating income		$	78.2			$	53.5			$	169.0
Metal gains (losses) (before considering LIFO)			5.5				(11.4	)			(13.1	)
Non-cash LIFO benefit (charges)			(8.7	)			7.5				14.0
Non-cash lower of cost or market inventory write down (1)			(9.3	)			(65.5	)			—
Mark-to-market gains (losses) (2)			4.9				(5.7	)			1.7
Restructuring charges and other costs (3)			(4.5	)			(8.8	)			—
Pre-emergence related environmental costs (4)			(.7	)			(5.0	)			(.9	)
Total non-run-rate items			(12.8	)			(88.9	)			1.7
Segment operating income excluding non-run-rate items		$	91.0			$	142.4			$	167.3

     As noted above, segment operating income excluding identified non-run-rate items for 2009 was $51.4 million lower than in 2008, and operating income excluding identified non-run-rate items for 2008 was $24.9 million lower than in 2007. Segment operating income for 2009 as compared to 2008 and for 2008 as compared to 2007 (in millions) reflects the following impacts:

		2009 vs. 2008				2008 vs. 2007
		Favorable				Favorable
		(unfavorable)				(unfavorable)
Sales impact		$	(94.0	)		$	24.8
Manufacturing inefficiencies(1)			13.6				(23.7	)
Energy costs			18.5				(12.1	)
Planned major maintenance			6.9				(2.6	)
Freight costs			6.7				(3.4	)
Depreciation expense			(1.6	)			(2.8	)
Currency exchange related			3.0				(1.3	)
Other			(4.5	)			(3.8	)
Total		$	(51.4	)		$	(24.9	)

     Segment operating results for 2009, 2008 and 2007 include (losses) gains on intercompany hedging activities with the hedging business unit totaling $(42.8) million, $16.9 million, and $19.8 million, respectively. These amounts eliminate in consolidation.

     All Other

     All Other is comprised of (i) Anglesey-related activities, including primary aluminum production prior to September 30, 2009 and secondary aluminum production thereafter, (ii) hedging activities in respect of our exposure to primary aluminum price risk and our exposure to British Pound Sterling exchange rate risk relating to Anglesey’s smelting operations through September 30, 2009, and (iii) corporate and other activities, expenses of which are not allocated to other business units:

     Primary/Secondary aluminum activities.

     The table below provides selected operational and financial information (in millions of dollars except shipments and prices) for Anglesey related primary/secondary aluminum activities:

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Shipments (mm lbs)			113.9				133.1				157.2
Average realized third party sales price (per pound)		$	.79			$	1.29			$	1.31
Net sales		$	89.9			$	171.4			$	206.2
Operating Income (Loss)		$	8.4			$	(14.8	)		$	58.7

     During 2009, third party net sales of primary aluminum decreased 47% compared to 2008. The decrease in net sales is primarily due to a 14% decrease in shipments and a 39% decrease in average realized prices. The lower shipments during the 2009 periods reflect the impact of the cessation of Anglesey’s smelting operation on September 30, 2009. Sales of primary aluminum from Anglesey’s smelting operations were recorded on a gross basis when title, ownership and risk of loss was passed to the buyer and collectability was reasonably assured. In connection with Anglesey's remelt operations, which commenced in the fourth quarter of 2009, we substantially reduced or eliminated our risks of inventory loss and metal prices and foreign currency exchange rate fluctuation. As we, in substance, are acting as the agent in the sales arrangement of the secondary aluminum products, the sales are and will be presented net of the cost of sales. During the fourth quarter of 2009, we did not recognize any net revenue on secondary aluminum shipments. During 2008, third party net sales of primary aluminum decreased 17% compared to 2007. The decrease in net sales is primarily due to a 15% decrease in shipments and a 2% decrease in average realized prices. The lower shipments during the 2008 periods reflect the loss of production from the outage triggered by the fire on June 12, 2008 (see discussion below).

     The following table recaps the major components of the operating results from Anglesey related primary and secondary aluminum activities for the current and prior year periods (in millions of dollars) and the discussion following the table indicates the primary factors leading to such differences. Many of such factors indicated are subject to significant fluctuation from period to period and are largely impacted by items outside management’s control. See Item 1A. “Risk Factors.”

						Year Ended
						December 31,
		2009				2008				2007
Profit on metal sales from smelting operations (net of alumina sales)(1)		$	10.2			$	15.5			$	7.1
Anglesey(2)			—				7.5				51.6
Impairment of investment in Anglesey			(1.8	)			(37.8	)			—
		$	8.4			$	(14.8	)		$	58.7

     Anglesey operated under a power agreement that provided sufficient power to sustain its smelting operations at near-full capacity until the contract expiration at the end of September 2009. Despite Anglesey’s efforts to find a sustainable alternative to its power supply needs, no sources of affordable power were identified to allow for the uninterrupted continuation of smelting operations beyond the expiration of the power contract. As a result, Anglesey fully curtailed its smelting operations on September 30, 2009.

     In the fourth quarter of 2009, Anglesey commenced remelt and casting operations to produce secondary aluminum. Anglesey purchases its own material for the remelt and casting operation and sells its output to us and Rio Tinto, in proportion to our respective ownership interests. We expect Anglesey’s maximum production of secondary aluminum to ultimately reach approximately 140 million pounds per year, 49% of which will be sold to us in transactions structured to largely eliminate risks of inventory loss and metal price and foreign currency exchange rate fluctuation with respect to our income and cash flow related to Anglesey.

     We fully impaired our investment in Anglesey during the fourth quarter of 2008, taking into account the full curtailment of Anglesey’s smelting operations due to its inability to obtain affordable power (which we had anticipated as a likely possibility), Anglesey’s cash requirements for redundancy and pension payments, uncertainty with respect to the future of its operations, and our conclusion at that time that we should not expect to receive any dividends from Anglesey in the foreseeable future. For the first half of

2009, based upon our continued assessment of the facts and circumstances, we recorded additional impairment charges of $1.8 million relating to our investment in Anglesey, such that our investment balance remained at zero.

     During the third quarter of 2009, Anglesey incurred a significant net loss, primarily as the result of recording charges for employee termination costs in connection with the cessation of its smelting operations. As a result of such loss and as we were not and are not obligated to (i) advance any funds to Anglesey, (ii) guarantee any obligations of Anglesey, or (iii) make any commitments to provide any financial support for Anglesey, we suspended the use of equity method of accounting with respect to our ownership in Anglesey during the quarter ended September 30, 2009. Accordingly, we did not recognize our share of Anglesey’s net loss for such period. We do not anticipate resuming the use of the equity method of accounting with respect to our investment in Anglesey unless and until (i) our share of any future net income of Anglesey equals or is greater than our share of net losses not recognized during periods for which the equity method was suspended and (ii) future dividends can be expected. We do not expect the occurrence of such events during the next 12 months.

     In June 2008, Anglesey suffered a significant failure in the rectifier yard that resulted in a localized fire in one of the power transformers. As a result of the fire, Anglesey operated below its production capacity during the latter half of 2008 and incurred incremental costs, primarily associated with repair and maintenance costs, as well as loss of margin due to the outage. Under its property damage and business interruption insurance coverage, Anglesey received insurance settlement payments of approximately 14.0 million Pound Sterling in 2008 and 2009. These payments did not have any impact on our results as we fully impaired the value of our share of the insurance proceeds received by Anglesey in 2008 and we did not record our 49% share of the 2009 settlement due to the suspension of equity method of accounting in the third quarter of 2009. We do not expect to receive any such insurance proceeds paid to Anglesey through the distribution of dividends. However, in December 2009, we received a $.6 million insurance settlement payment for the loss of premium on the sale of our share of value added aluminum products resulting from the interruption of production caused by the fire.

Hedging activities.

     Our pricing of fabricated aluminum products, as discussed above, is generally intended to lock-in a conversion margin (representing the value added from the fabrication process(es)) and to pass metal price risk on to our customers. However, in certain instances we do enter into firm price arrangements. In such instances, we have price risk on our anticipated primary aluminum purchases in respect of the customer’s order. As such, whenever our Fabricated Products segment enters into a firm price customer contract, our Hedging business unit and Fabricated Products segment enter into an “internal hedge” so that metal price risk resides in our Hedging business unit under All Other. Results from internal hedging activities between Fabricated Products and Hedging eliminate in consolidation. As more fully discussed in Item 7A. “Quantitative and Qualitative Disclosures About Market Risk,” prior to the cessation of Anglesey’s smelting operations on September 30, 2009, our net exposure to primary aluminum price risk at Anglesey offset a significant amount the volume of fabricated products shipments with underlying primary aluminum price risk. As such, we considered our access to Anglesey production overall to be a “natural” hedge against Fabricated Products firm metal-price risk. However, since the volume of fabricated products shipped under firm prices may not have matched up on a month-to-month basis with expected Anglesey-related primary aluminum shipments and to the extent that firm price contracts from our Fabricated Products segment exceeded the Anglesey related primary aluminum shipments, we used third party hedging instruments to minimize any net remaining primary aluminum price exposure existing at any time.

     As a result of the cessation of Anglesey’s smelting operations as of September 30, 2009 noted above, the “natural hedge” against primary aluminum price fluctuation created by our participation in the primary aluminum market was effectively eliminated. Accordingly, we use third party hedging instruments to limit exposure to Fabricated Products firm metal-price risks, which may have an adverse effect on our financial position, results of operations and cash flows.

     In addition to conducting hedging activities in respect of our exposure to aluminum price risk, the hedging business unit also conducted hedging activities in respect of our exposure to British Pound Sterling exchange rate relating to Anglesey’s smelting operations through September 30, 2009.

     All hedging activities are managed centrally on behalf of our business units to minimize transaction costs, to monitor consolidated net exposures and to allow for increased responsiveness to changes in market factors.

     The table below provides a detail of operating income from our Hedging business unit for 2009, 2008 and 2007:

						Year Ended
						December 31,
		2009				2008				2007
Internal hedging with Fabricated Products(1)			42.8				(16.9	)			(19.8	)
Derivative settlements — Pound Sterling(2)			(12.2	)			(2.9	)			10.2
Derivative settlements — External metal hedging(2)			(29.2	)			16.4				(10.6	)
Market-to-market on derivative instruments(2)			75.6				(81.4	)			8.0
		$	77.0			$	(84.8	)		$	(12.2	)

Corporate and Other activities.

     Operating expenses within the Corporate and Other business unit represent general and administrative expenses that are not allocated to other business units, and Other operating benefits discussed above. The table below presents non-run-rate items within the Corporate and Other business unit, operating loss and operating loss excluding non-run-rate items:

						Year Ended
						December 31,
		2009				2008				2007
Operating loss			(44.9	)			(44.8	)			(33.5	)
VEBA net periodic benefit (cost) income			(5.3	)			0.6				2.6
Pre-emergence related environmental costs			(1.7	)			(0.5	)			—
Restructuring charges			(0.9	)			—				—
Other operating benefits			0.9				1.4				13.6
Total non-run-rate items			(7.0	)			1.5				16.2
Operating loss excluding non-run-rate		$	(37.9	)		$	(46.3	)		$	(49.7	)

     Corporate operating expenses excluding non-run-rate items for 2009 were $8.4 million lower than such expenses for 2008. The decrease reflects primarily (i) a $2.6 million decrease in short term incentive compensation accrual, (ii) a $3.6 million reduction in professional fees and (iii) a $1.9 million reduction in stock compensation cost based upon timing of vesting and changes in vesting assumptions relating to performance shares.

     Corporate operating expenses before non-run-rate items for 2008 were $3.4 million lower than such expenses for 2007. The decrease reflects primarily (i) a $1.6 million decrease in short term incentive compensation accrual, (ii) a $2.7 million reduction in professional fees related primarily to compliance with the Sarbanes-Oxley Act of 2002 and (iii) a $1.0 million increase in stock compensation cost based upon timing of vesting and changes in vesting assumptions relating to performance shares offsetting partially the other decreases in operating expenses.

     We consider the restructuring costs and other charges, the environmental costs incurred in 2008 in connection with certain of our former production facilities, and the VEBA net period benefit costs discussed above to be non-run-rate items.

Other Information

     We have significant federal income tax attributes. Section 382 of the Code affects a corporation’s ability to use its federal income tax attributes, including its net operating loss carry-forwards, following a more than 50% change in ownership during any period of 36 consecutive months, all as determined under the Code (an “ownership change”). Under Section 382(l)(5) of the Code, if we were to have an ownership change, our ability to use our federal income tax attributes would be limited to an amount equal to the product of (i) the aggregate value of our outstanding common shares immediately prior to the ownership change and (ii) the applicable federal long-term tax exempt rate in effect on the date of the ownership change.

     In order to reduce the risk that any change in our ownership would jeopardize the preservation of our federal income tax attributes, our certificate of incorporation prohibits certain transfers of our equity securities. More specifically, subject to certain exceptions for

transactions that would not impair our federal income tax attributes, our certificate of incorporation prohibits a transfer of our equity securities without the prior approval of our Board of Directors if either (a) the transferor holds 5% or more of the total fair market value of all of our issued and outstanding equity securities (such person, a “5% shareholder”) or (b) as a result of such transfer, either (i) any person or group of persons would become a 5% shareholder or (ii) the percentage stock ownership of any 5% shareholder would be increased (any such transfer, a “5% transaction”).

     In addition, we have a stock transfer restriction agreement with the Union VEBA, which is our largest shareholder. Under the stock transfer restriction agreement, until the restriction release date, subject to exceptions for certain transactions that would not impair our federal income tax attributes, the Union VEBA is prohibited from transferring or otherwise disposing of more than 15% of the total common shares issued to the Union VEBA pursuant to our Plan during any 12-month period without the prior approval of our Board of Directors. Under our stock transfer restriction agreement, the number of common shares that generally may be sold by the Union VEBA during any 12-month period is 1,321,485. As of January 31, 2010, the Union VEBA may sell up to 1,321,485 common shares.

     Preserving our federal income tax attributes affects our ability to issue new common shares because such issuances must be considered in determining whether an ownership change has occurred under Section 382 of the Code. We estimate that we can currently issue approximately 30.0 million common shares without potentially impairing our ability to use our federal income tax attributes. However, additional sales by the Union VEBA could, and other 5% transactions would, decrease the number of common shares we can issue during any 36 month period without impairing our ability to use our federal income tax attributes. Similarly, any issuance of common shares by us would limit the number of shares that could be transferred in 5% transactions (other than sales permitted to be made by the Union VEBA under the stock transfer restriction agreement without the consent of our Board of Directors). If at any time we were to issue the maximum number of common shares that we could possibly issue without potentially impairing our ability to use of our federal income tax attributes, there could be no 5% transactions (other than sales by the Union VEBA permitted under the stock transfer restriction agreement without the consent of our Board of Directors) during the 36-month period thereafter.

Liquidity and Capital Resources

     Summary

     Cash and cash equivalents were $30.3 million as of December 31, 2009, up from $.2 million as of December 31, 2008. In addition to cash and cash equivalents, our revolving credit facility is a source of liquidity for operations. Borrowing on the revolving credit facility was zero at December 31, 2009, down from $36.0 million at December 31, 2008. Operating income and net cash inflows from changes in certain current assets and liabilities during 2009 contributed to the repayment of revolving credit borrowings and the increase in cash and cash equivalents. Of the $127.7 million of net cash provided by operating activities during 2009, approximately $118.7 million was attributable to operating income for the period. Significant cash flows from changes in current assets and liabilities include decreases in inventories of $29.1 million, in trade and other receivables of $30.1 million, and in net receivables from affiliate of $11.6 million. Partially offsetting these cash inflows was a $19.8 million decrease in other accrued liabilities and a $18.5 million decrease in payables to affiliate.

     Cash equivalents consist primarily of money market accounts and other highly liquid investments with an original maturity of three months or less when purchased. Our liquidity is affected by restricted cash that is pledged as collateral for derivative contracts with our counterparties and for certain letters of credit, or restricted to use for workers’ compensation requirements and certain agreements. Short term restricted cash, included in Prepaid expenses and other current assets, totaled $.9 million and $1.4 million as of December 31, 2009 and December 31, 2008, respectively. Long term restricted cash, which was included in Other Assets, was $17.4 million and $35.4 million as of December 31, 2009 and December 31, 2008, respectively. Included in long term restricted cash at December 31, 2009 and December 31, 2008 were zero and $17.2 million, respectively, of margin call deposits with our counterparties relating to our derivative positions.

Cash Flows

     The following table summarizes our cash flow from operating, investing and financing activities for each of the past three years (in millions of dollars):

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Total cash provided by (used in):
Operating activities:
Fabricated Products		$	154.1			$	82.9			$	162.1
All Other			(26.4	)			(36.0	)			(32.5	)
		$	127.7			$	46.9			$	129.6
Investing activities:
Fabricated Products			(59.2	)			(91.6	)			(61.8	)
All Other			18.5				(20.9	)			9.2
		$	(40.7	)		$	(112.5	)		$	(52.6	)
Financing activities:
All Other			(56.9	)			(2.9	)			(58.3	)
		$	(56.9	)		$	(2.9	)		$	(58.3	)

Operating Activities

     Fabricated Products — In 2009, Fabricated Products’ operating activities provided $154.1 million of cash compared to $82.9 million of cash provided in 2008. Cash provided in 2009 was primarily related to operating income of $78.2 million and significant cash flows from changes in current assets and liabilities, including a decrease in accounts receivables of $16.3 million, a decrease in inventory of $28.3 million, and an increase of $11.3 million in deferred revenues related primarily to cash received during the year from customers in advance of periods for which (i) production capacity is reserved, (ii) customer commitments have been deferred or reduced or (iii) performance is completed. Cash provided by Fabricated Products segment decreased in 2008 compared to 2007 due primarily to lower operating results and increases in accounts receivables and inventories (excluding the effect of lower of cost or market inventory write-down).

     All Other — Cash used in operations in All Other is comprised of (i) cash provided (used) from Anglesey related operating activities, (ii) cash provided by (used in) hedging activities and (iii) cash used in corporate and other activities.

     Anglesey related activities used $6.0 million of cash in 2009, compared to cash provided from Anglesey related activities of $37.3 million and $24.5 million of cash in 2008 and 2007, respectively. Operating cash flows in all periods presented were comprised of operating income from Anglesey related activities and changes in working capital. The decrease in cash flows in 2009 compared to 2008 is primarily due to a decrease in operating income as a result of the cessation of Anglesey’s smelting operation on September 30, 2009, decreases in Accounts Payable and net Payable to/Due from affiliate. The increase in cash in 2008 compared to 2007 is primarily due to a decrease in Trade receivables and an increase in Payable to affiliate.

     Hedging related activities provided $18.8 million of cash during 2009 compared to $23.3 million of cash used in 2008 and $18.0 million used in 2007. Cash provided by (used in) our Hedging business unit are related to realized hedging gains (losses) on our derivative positions and are affected by the timing of settlement of such realized gains (losses).

     Corporate and other operating activities used $39.2 million, $50.0 million and $39.0 million of cash during 2009, 2008 and 2007, respectively. Cash outflow from Corporate and Other operating activities in 2009 consist primarily of $4.9 million of annual VEBA contribution and payments of $27.2 million in respect of cash general and administrative costs. In 2008, cash outflow consisted primarily of payment in respect of general and administrative costs of $34.6 million and annual VEBA contribution of $8.5 million. In 2007, cash outflow consisted primarily of payment in respect of cash general and administrative costs of $36.7 million and payment for reorganization costs of $7.0 million partially offset by $8.7 million of proceeds from Other operating (benefit) charges, net.

Investing Activities

     Fabricated Products — Cash used in investing activities for Fabricated Products was $59.2 million in 2009, compared to $91.6 million and $61.8 million of cash used in 2008 and 2007, respectively. Cash used in investing activities in 2009, 2008 and 2007 was primarily related to our capital expenditures. Refer to “Capital Expenditures” below for additional information.

     All Other — Investing activities in All Other is primarily related to margin deposits required as cash collateral with our derivative counterparties and restricted cash we had on deposit as financial assurance for certain environmental obligations and workers’ compensation claims from the State of Washington. Cash used in investing activities in All Other was $20.9 million in 2008, representing transfers of the aforementioned margin call deposits to our counterparties relating to our derivative positions at December 31, 2008 and cash deposits required relating to workers’ compensation with the State of Washington. Cash generated from investing activities in All Other in 2009 included the return of a portion the 2008 deposits. Cash inflow in 2007 was related to the release of restricted funds that we had on deposit as financial assurance for workers’ compensation claims from the State of Washington.

Financing Activities

     All Other — Cash used in financing activities in 2009 was $56.9 million. The cash outflow was primarily related to the repayment of net borrowings under our revolving credit facility of $36.0 million and $19.6 million in cash dividends paid to stockholders. Cash used in financing activities was $2.9 million in 2008. The cash outflow was primarily related to $28.1 million used in share repurchases and $17.2 million in cash dividends paid to shareholders, partially offset by $36.0 million of net borrowings under our revolving credit facility and $7.0 million of borrowing under a note payable (see “Debt and Capital” below). Cash used in financing activities in 2007 was primarily related to a $50.0 million repayment of the term loan and $7.4 million in cash dividends paid to shareholders.

Sources of Liquidity

     Our most significant sources of liquidity are funds generated by operating activities, available cash and cash equivalents, and borrowing availability under our revolving credit facility. We believe funds generated from the expected results of operations, together with available cash and cash equivalents and borrowing availability under our revolving credit facility, will be sufficient to finance expansion plans and strategic initiatives, which could include acquisitions, for at least the next fiscal year. There can be no assurance, however, that we will continue to generate cash flows at or above current levels or that we will be able to maintain our ability to borrow under our revolving credit facility.

     Under the revolving credit facility, we are able to borrow (or obtain letters of credit) from time-to-time in an aggregate amount equal to the lesser of $265 million or a borrowing base comprised of eligible accounts receivable, eligible inventory and certain eligible machinery, equipment and real estate, reduced by certain reserves, all as specified in the revolving credit facility. In addition, of the aggregate amount available under the revolving credit facility, up to $60 million may be utilized for letters of credit. The revolving credit facility matures in July 2011, at which time all principal amounts outstanding thereunder will be due and payable. Borrowings under the revolving credit facility bear interest at a rate equal to either a base prime rate or LIBOR, at our option, plus a specified variable percentage determined by reference to the then remaining borrowing availability under the revolving credit facility. The revolving credit facility may, subject to certain conditions and the agreement of lenders thereunder, be increased up to $275 million. At December 31, 2009, based upon the borrowing base determination in effect as of that date, we had $171 million available under the revolving credit facility, of which $10 million was being used to support outstanding letters of credit, leaving $161 million of availability.

     As of February 15, 2010, we had $193.5 million available for borrowings and letters of credit under the revolving credit facility, of which $10.0 million was being used to support outstanding letters of credit, leaving $183.5 million of availability. No borrowings were outstanding as of February 15, 2010 under the revolving credit facility.

     Amounts owed under the revolving credit facility may be accelerated upon the occurrence of various events of default including, without limitation, the failure to make principal or interest payments when due and breaches of covenants, representations and warranties. The revolving credit facility is secured by a first priority lien on substantially all of our assets and the assets of our domestic operating subsidiaries that are also borrowers thereunder. The revolving credit facility, as amended, places restrictions on our ability and certain of our subsidiaries to, among other things, incur debt, create liens, make investments, pay dividends, repurchase stock, sell assets, undertake transactions with affiliates and enter into unrelated lines of business.

Capital Expenditures

     A component of our long-term strategy is our capital expenditure program including our organic growth initiatives.

     The following table presents our capital expenditures, net of accounts payable, for each of the past three fiscal years (in millions of dollars):

		Year Ended				Year Ended				Year Ended
		December 31,				December 31,				December 31,
		2009				2008				2007
Kalamazoo, Michigan Facility (1)		$	47			$	20			$	3
Spokane, Washington facility (2)			5				36				51
Purchase of real property of our Los Angeles, California facility (3)			—				10				—
Other (4)			7				28				11
Capital expenditures in accounts payable			—				(1	)			(3	)
Total capital expenditures, net of accounts payable		$	59			$	93			$	62

     Total capital expenditures for Fabricated Products are currently expected to range from $50 million to $60 million for all of 2010 and are expected to be funded using cash from operations, borrowings under our revolving credit facility, or other third party financing sources.

     The level of anticipated capital expenditures for future periods may be adjusted from time to time depending on our business plans, price outlook for fabricated aluminum products, our ability to maintain adequate liquidity and other factors. No assurance can be provided as to the timing or success of any such expenditures.

Debt

     On December 19, 2008, we executed a promissory note (the “Note”) in the amount of $7.0 million in connection with the purchase of real property of our Los Angeles, California facility. Interest is payable on the unpaid principal balance of the Note monthly in arrears on the outstanding principal balance at the prime rate, as defined in the Note, plus 1.5%, in no event to exceed 10% per annum, on the first day of each month. A principal payment of $3.5 million is due February 1, 2012 and the remaining principal of $3.5 million is due on February 1, 2013. The Note is secured by the deed of trust on the property.

Dividends

     In June 2007, our Board of Directors initiated the declaration of regular quarterly cash dividends to holders of our common stock, including the holders of restricted stock. Such dividend declarations also result in the payment of dividend equivalents to the holders of certain restricted stock units and the holders of performance shares with respect to one half of the performance shares. Dividends

declared were $.18 per common share per quarter until June 2008, at which time our Board of Directors increased the quarterly cash dividend to $.24 per common share per quarter. Total cash dividends (and dividend equivalents) paid in 2009, 2008 and 2007 were $.96 per share (or $19.6 million), $.84 per common share (or $17.2 million) and $.36 per common share (or $7.4 million), respectively.

     In January 2010, our Board of Directors declared another quarterly cash dividend of $.24 per common share, or $4.9 million, to stockholders of record at the close of business on January 25, 2010, which was paid on or about February 12, 2010.

     Further declaration and payment of dividends, if any, will be at the discretion of the Board of Directors and will be dependent upon our results of operations, financial condition, cash requirements, future prospects and other factors. We can give no assurance that any dividends will be declared or paid in the future. Our revolving credit facility, as amended on January 9, 2009, restricts our ability to pay dividends. We may pay cash dividends only if we maintain $100 million in borrowing availability thereunder and are not in default and would not be in default as a result of the dividend payment, and such dividends cannot exceed $25 million during any fiscal year.

Stock Repurchase Plan

     In June 2008, our Board of Directors authorized the repurchase of up to $75 million of our common shares, with repurchase transactions to occur in open-market or privately negotiated transactions at such times and prices as management deemed appropriate and to be funded with our excess liquidity after giving consideration to internal and external growth opportunities and future cash flows. The repurchase plan may be modified, extended or terminated by our Board of Directors at any time. We repurchased a total of 572,706 common shares at the weighted-average price of $49.05 per share under this repurchase plan. As of December 31, 2009, $46.9 million remained available for repurchasing under the existing repurchase authorization.

     Our revolving credit facility, as amended on January 9, 2009, prohibits us from making further share repurchases. As a result, we can no longer repurchase our common shares under our stock repurchase plan or otherwise, or withhold common shares to satisfy employee minimum statutory withholding obligations in connection with the vesting of equity awards under our compensation programs, without lender approval.

Restrictions Related to Equity Capital

     As we discussed in Note 9 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” and elsewhere in this Report, there are restrictions on the transfer of our common shares. See “Other Information” above for additional information on the restrictions and related effects on our equity capital. In addition, our revolving credit facility, as amended, prohibits us from repurchasing our common stock and limits our ability to pay dividends.

Environmental Commitments and Contingencies

     We are subject to a number of environmental laws and regulations, to fines or penalties assessed for alleged breaches of the environmental laws and regulations, and to claims and litigation based upon such laws and regulations. Based on our evaluation of these and other environmental matters, we have established environmental accruals of $9.7 million at December 31, 2009 of which $6.2 million is related to our Trentwood facility in Spokane, Washington. However, we believe that it is reasonably possible that changes in various factors could cause costs associated with these environmental matters to exceed current accruals by amounts that could be, in the aggregate, up to an estimated $16.9 million, primarily in connection with our ongoing efforts to address the historical use of oils containing polychlorinated biphenyls, or PCBs, at the Trentwood facility in Spokane, Washington where we are working with regulatory authorities and performing studies and remediation pursuant to several consent orders with the State of Washington.

Contractual Obligations, Commercial Commitments and Off-Balance Sheet and Other Arrangements

Contractual Obligations and Commercial Commitments

     We are obligated to make future payments under various contracts such as long-term purchase obligations and lease agreements. We have grouped these contractual obligations into operating activities, investing activities and financing activities in the same manner as they are classified in our Statements of Consolidated Cash Flows included in Item 8. “Financial Statements and Supplemental Data” in order to provide a better understanding of the nature of the obligations and to provide a basis for comparison to historical information.

     The following table provides a summary of our significant contractual obligations at December 31, 2009 (dollars in millions):

														Payments Due by Period
																						2014 and
		Total				2010				2011				2012				2013				Thereafter
Operating activities:
Purchase obligations(1)		$	220.8			$	209.1			$	1.4			$	1.4			$	1.4			$	7.5
Operating leases(1)			60.6				6.6				6.1				5.7				4.8				37.4
Environmental liability(1)			9.7				3.9				2.6				.9				.9				1.4
Investing activities:
Capital equipment(2)			4.8				4.7				.1				—				—				—
Financing activities:
Note payable			7.0				—				—				3.5				3.5				—
Other:
Standby letters of credit(3)			10.0
Uncertain tax liabilities (4)			14.5				1.0
Total contractual obligations( 5)		$	327.4			$	225.3			$	10.2			$	11.5			$	10.6			$	46.3

Obligations for Operating Activities

     Cash outlays for operating activities primarily consist of purchase obligations with respect to our primary aluminum, other raw materials, energy and operating leases.

     We have various contracts with suppliers of aluminum that require us to purchase minimum quantities of aluminum in future years at a price to be determined at the time of purchase based primarily on the underlying metal price at that time. Amounts included in the table are based on minimum quantities at the metal price at December 31, 2009. We believe the minimum quantities are lower than our current requirements for aluminum. Actual quantities and actual metal prices at the time of purchase could be different.

     Operating leases represent multi-year obligations for certain manufacturing facilities, warehousing, office space and equipment.

     Environmental liability represents the environmental accrual at December 31, 2009.

Obligations for Investing Activities

     Capital project spending included in the preceding table represents non-cancelable capital commitments as of December 31, 2009. We expect capital projects to be funded through cash from our operations, borrowing under our revolving credit facility or other financing sources.

Obligations for Financing Activities

     Cash outlays for financing activities consist of our obligations under long term debt. As noted above, as of December 31, 2009, we had zero borrowings outstanding under our revolving credit facility and $7.0 million of note payable.

Off-Balance Sheet and Other Arrangements

     We had agreements to supply alumina to and to purchase aluminum from Anglesey through September 30, 2009, when the power contract expired. Both the alumina sales agreement and primary aluminum purchase agreement were tied to primary aluminum prices. We currently purchase secondary aluminum from Anglesey based on orders from customers, in proportion to our ownership interest, at prices tied to the market price of primary aluminum.

     Our employee benefit plans include the following:

	•		We are obligated to make monthly contributions of $1.00 per hour worked by each bargaining unit employee to the appropriate multi-employer pension plans sponsored by the USW and IAM and certain other unions at certain of our production facilities, except for a pension plan sponsored by the USW, to which we are obligated to make monthly contributions of $1.25 per hour worked by each bargaining unit employee at our Newark, Ohio and Spokane, Washington facilities starting July 2010 through July 2014, at which time we will be obligated to make monthly contributions of $1.50 per hour worked by each bargaining unit employee at our Newark, Ohio and Spokane, Washington facilities. We currently estimate that contributions will range from $2 million to $4 million per year through 2013.
	•		We have a defined contribution 401(k) savings plan for hourly bargaining unit employees at five of our production facilities. We are required to make contributions to this plan for active bargaining unit employees at four of these production facilities ranging from (in whole dollars) $800 to $2,400 per employee per year, depending on the employee’s age. We currently estimate that contributions to such plans will range from $1 million to $3 million per year.
	•		We have a defined benefit plan for our salaried employees at our production facility in London, Ontario with annual contributions based on each salaried employee’s age and years of service. At December 31, 2009, approximately 55% of the plan assets are invested in equity securities, 40% of plan assets are invested in debt securities and the remaining plans assets are invested in short term securities. The Company’s investment committee reviews and evaluates the investments portfolio. The long-term asset mix target allocation is approximately 60% in equity securities and 36% in debt securities with the remaining assets in short term securities.
	•		We have a defined contribution savings plan for salaried and certain hourly employees providing for a concurrent match of up to 4% of certain contributions made by employees plus an annual contribution of between 2% and 10% of their compensation depending on their age and years of service. All new hires after January 1, 2004 receive a fixed 2% contribution annually. We currently estimates that contributions to such plan will range from $4 million to $6 million per year.
	•		We have a non-qualified defined contribution restoration plan for key employees who would otherwise suffer a loss of benefits under our defined contribution 401(k) savings plan as a result of the limitations by the Code.
	•		We have an annual variable cash contribution to the Salaried VEBA and Union VEBA pursuant to various agreements with the VEBAs. Under these agreements, the amount to be contributed to the VEBAs will be 10% of the first $20 million of annual cash flow (as defined; but generally, earnings before interest, taxes and depreciation and amortization (“EBITDA”) less cash payments for, among other things, interest, income taxes and capital expenditures), plus 20% of annual cash flow, as defined, in excess of $20 million. In connection with the renegotiation and entry of a labor agreement with the USW in regard to employees of our Newark, Ohio and Spokane, Washington facilities on January 20, 2010, we agreed to extend our obligation to make annual variable cash contributions to the Union VEBA to September 30, 2017. Under these agreements the aggregate annual payments may not exceed $20 million and are also limited (with no carryover to future years) to the extent that the payments would cause our liquidity to be less than $50 million. Such amounts are determined on an annual basis and payable within 120 days following the end of fiscal year, or within 15 days following the date on which we file our Annual Report on Form 10-K with the SEC (or, if no such report is required to be filed, within 15 days of the delivery of the independent auditor’s opinion of our annual financial statements), whichever is earlier. At December 31, 2009, an annual contribution of $2.4 million was accrued and is payable in the first quarter of 2010.
			The following table shows (in millions of dollars) the estimated amount of variable VEBA payments that would occur under these agreements at differing levels of EBITDA and cash payments in respect of, among other items, interest, income taxes and capital expenditures. The table below does not consider the liquidity

limitation and certain other factors that could impact the amount of variable VEBA payments due and, therefore, should be considered only for illustrative purposes.

								Cash Payments for
				Capital Expenditures, Income Taxes,
								Interest Expense, etc.
EBITDA				$25.0				$50.0				$75.0				$100.0
$	20.0			$	—			$	—			$	—			$	—
	40.0				1.5				—				—				—
	60.0				5.0				1.0				—				—
	80.0				9.0				4.0				.5				—
	100.0				13.0				8.0				3.0				—
	120.0				17.0				12.0				7.0				2.0
	140.0				20.0				16.0				11.0				6.0
	160.0				20.0				20.0				15.0				10.0
	180.0				20.0				20.0				19.0				14.0
	200.0				20.0				20.0				20.0				18.0

	•		We have a short term incentive compensation plan for certain members of management, payable in cash and based primarily on earnings, adjusted for certain safety and performance factors. Most of our production facilities have similar programs for both hourly and salaried employees.
	•		On July 6, 2006, the 2006 Equity and Performance Incentive Plan (as amended, the “Equity Incentive Plan”) became effective. Under the Equity Incentive Plan, awards are granted for certain members of management, our directors, and directors emeritus, as more fully discussed in Note 10 of Notes to Consolidated Financial Statements, included in Item 8. “Financial Statements and Supplementary Data.” Awards have been made in each calendar year, since inception of the Equity Incentive Plan, and additional awards are expected to be made in 2010 and future years.
	•		We have outstanding letters of credit of $10.0 million under our revolving credit facility as of December 31, 2009.

Critical Accounting Estimates

     Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material.

     Our significant accounting policies are discussed in Note 1 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data.” Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effects of matters that are inherently uncertain. Management has reviewed these critical accounting estimates and related disclosures with the Audit Committee of our Board of Directors.

				Potential Effect if Actual Results
Description		Judgments and Uncertainties		Differ From Assumptions
Our judgments and estimates with respect to commitments and contingencies.
Valuation of legal and other contingent claims is subject to a great deal of judgment and substantial uncertainty. Under GAAP, companies are required to accrue for contingent matters in their financial statements only if both (i) the potential loss is “probable” and (ii) the amount (or a range) of probable loss is “estimatable.” In reaching a		In estimating the amount of any loss, in many instances a single estimation of the loss may not be possible. Rather, we may only be able to estimate a range for possible losses. In such event, GAAP requires that a liability be established for at least the minimum end of the range assuming that there is no other amount		Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material if different than those reflected in our accruals. To the extent we prevail in matters for which reserves have been established or are required to pay amounts in

				Potential Effect if Actual Results
Description		Judgments and Uncertainties		Differ From Assumptions
determination of the probability of an adverse ruling in respect of a matter, we typically consult outside experts. However, any such judgments reached regarding probability are subject to significant uncertainty. We may, in fact, obtain an adverse ruling in a matter that we did not consider a “probable” loss or “estimatable” and which, therefore, was not accrued for in our financial statements. Additionally, facts and circumstances in respect of a matter can change causing key assumptions that were used in previous assessments of a matter to change. It is possible that amounts at risk in respect of one matter may be “traded off” against amounts under negotiations in a separate matter.		which is more likely to occur.		excess of our reserves, our future results from operations could be materially affected.
Our judgments and estimates in respect of defined benefit plans.
At December 31, 2009, we had two defined benefit postretirement medical plans (the postretirement medical plans maintained by the VEBAs which we are required to reflect on our financial statements despite our limited obligations to the VEBAs in regard to those plans) and a pension plan for our Canadian plant. Liabilities and expenses for pension and other postretirement benefits are determined using actuarial methodologies and incorporate significant assumptions, including the rate used to discount the future estimated liability, the long-term rate of return on plan assets, and several assumptions relating to the employee workforce (i.e., salary increases, medical costs, retirement age, and mortality). The most significant assumptions used in determining the estimated year-end obligations were the assumed discount rate, long-term rate of return (“LTRR”) and the assumptions regarding future medical cost increases. In addition to the above assumptions used in the actuarial valuation, changes in plan provisions could also have a material impact on the net funded status of the VEBAs. Our only obligation to the VEBAs is to pay the annual variable contribution amount and we have no control over the plan provisions. We rely on information provided to us by the VEBA administrators with respect to specific plan provisions such as annual benefits paid. See Note 9 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for additional information in respect of the benefit plans.		Since recorded obligations represent the present value of expected pension and postretirement benefit payments over the life of the plans, decreases in the discount rate (used to compute the present value of the payments) would cause the estimated obligations to increase. Conversely, an increase in the discount rate would cause the estimated present value of the obligations to decline. The LTRR on plan assets reflects an assumption regarding what the amount of earnings would be on existing plan assets (before considering any future contributions to the plans). Increases in the assumed LTRR would cause the projected value of plan assets available to satisfy pension and postretirement obligations to increase, yielding a reduced net expense in respect of these obligations. A reduction in the LTRR would reduce the amount of projected net assets available to satisfy pension and postretirement obligations and, thus, cause the net expense in respect of these obligations to increase. As the assumed rate of increase in medical costs goes up, so does the net projected obligation. Conversely, if the rate of increase was assumed to be smaller, the projected obligation would decline. A change in plan provisions would cause the estimate obligations to change. An increase in annual paid benefits would increase the estimated present value of the obligations and conversely, a decrease in annual paid benefits would decrease the present value of the obligations.		The rate used to discount future estimated liabilities is determined considering the rates available at year end on debt instruments that could be used to settle the obligations of the plan. A change in the discount rate of 1/4 of 1% would impact the accumulated pension benefit obligations by approximately $.2 million, $1.3 million and $6 million in relation to the Canadian pension plan, the Salaried VEBA and the Union VEBA, respectively, and impact 2010 expense by $.5 million. The LTRR on plan assets is estimated by considering historical returns and expected returns on current and projected asset allocations. A change in the assumption for LTRR on plan assets of 1/4 of 1% would impact expense by approximately $.1 million and $.9 million in 2010 in relation to the Salaried VEBA and the Union VEBA, respectively. An increase in the health care trend rate of 1/4 of 1% would increase the accumulated benefit obligations of the Union VEBA by approximately $5.0 million and increase 2010 expense by $.9 million. Conversely, a decrease in the health care trend rate of 1/4 of 1% would decrease accumulated benefit obligations of the Union VEBA by approximately $6.2 million and decrease 2010 expense by $1.0 million. A change of $250 in annual benefits per participant would change the estimated present value of the obligations of the Salaried VEBA by $8.7 million.

				Potential Effect if Actual Results
Description		Judgments and Uncertainties		Differ From Assumptions
Our judgments and estimates in respect to environmental commitments and contingencies.
We are subject to a number of environmental laws and regulations, to fines or penalties assessed for alleged breaches of such laws and regulations and to claims and litigation based upon such laws and regulations. Based on our evaluation of environmental matters, we have established environmental accruals, primarily related to potential solid waste disposal and soil and groundwater remediation matters. These environmental accruals represent our estimate of costs reasonably expected to be incurred on a going concern basis in the ordinary course of business based on presently enacted laws and regulations, currently available facts, existing technology and our assessment of the likely remediation action to be taken. See Note 11 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for additional information in respect of environmental contingencies.		Making estimates of possible environmental remediation costs is subject to inherent uncertainties. As additional facts are developed and definitive remediation plans and necessary regulatory approvals for implementation of remediation are established or alternative technologies are developed, changes in these and other factors may result in actual costs exceeding the current environmental accruals.		Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material if different than those reflected in our accruals. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our future results from operations could be materially affected.
Our judgments and estimates in respect of conditional asset retirement obligations.
We recognize conditional asset retirement obligations (“CAROs”) related to legal obligations associated with the normal operations of certain of our facilities. These CAROs consist primarily of incremental costs that would be associated with the removal and disposal of asbestos (all of which is believed to be fully contained and encapsulated within walls, floors, ceilings or piping) of certain of the older facilities if such facilities were to undergo major renovation or be demolished. There are currently plans for such renovation or demolition of certain facilities and our current assessment is that certain immaterial CAROs could be triggered in the next seven years. Other locations, in which there are no current plans for renovations or demolitions, the most probable scenario is those related CARO’s would not be triggered for 20 or more years, if at all.		The estimation of CAROs is subject to a number of inherent uncertainties including: (1) the timing of when any such CARO may be incurred, (2) the ability to accurately identify all materials that may require special handling or treatment, (3) the ability to reasonably estimate the total incremental special handling and other costs, (4) the ability to assess the relative probability of different scenarios which could give rise to a CARO, and (5) other factors outside a company’s control including changes in regulations, costs and interest rates. As such, actual costs and the timing of such costs may vary significantly from the estimates, judgments and probable scenarios we considered, which could, in turn, have a material impact on our future financial statements.		Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material if different than those reflected in our accruals.
Under current accounting guidelines, liabilities and costs for CAROs must be recognized in a company’s financial statements even if it is unclear when or if the CARO will be triggered. If it is unclear when or if a CARO will be triggered, companies are required to use probability weighting for possible timing scenarios to determine the

				Potential Effect if Actual Results
Description		Judgments and Uncertainties		Differ From Assumptions
probability weighted amounts that should be recognized in the company’s financial statements.
See Note 4 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for additional information in respect of environmental contingencies.
Long Lived Assets.
Long-lived assets other than goodwill and indefinite-lived intangible assets, which are separately tested for impairment, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. When evaluating long-lived assets for potential impairment, we first compare the carrying value of the asset to the asset’s estimated future cash flows (undiscounted and without interest charges). If the estimated future cash flows are less than the carrying value of the asset, we calculate an impairment loss. The impairment loss calculation compares the fair value, which may be based on estimated future cash flows (discounted and with interest charges). We recognize an impairment loss if the amount of the asset’s carrying value exceeds the assets estimated fair value. If we recognize an impairment loss, the adjusted carrying amount of the asset becomes its new cost basis. For a depreciable long-lived asset, the new cost basis will be depreciated (amortized) over the remaining useful life of that asset.		Our impairment loss calculations contain uncertainties because they require management to make assumptions and apply judgment to estimate future cash flows and asset fair values, including forecasting useful lives of the assets and selecting the discount rate that reflects the risk inherent in future cash flows.		We have not made any material changes in our impairment loss assessment methodology during the past three fiscal years. We do not believe there is a reasonable likelihood that there will be a material change in the estimates or assumptions we use to calculate long-lived asset impairment losses. However, if actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to further losses from impairment charges that could be material.
Income Tax Provision.
We have substantial tax attributes available to offset the impact of future income taxes. We have a process for determining the need for a valuation allowance with respect to these attributes. The process includes an extensive review of both positive and negative evidence including our earnings history, future earnings, adverse recent occurrences, carry forward periods, an assessment of the industry and the impact of the timing differences. At the conclusion of this process in 2007, we determined we met the “more likely than not” criteria to recognize the vast majority of our tax attributes. The benefit associated with the reduction of the valuation allowance, previously recorded against these tax attributes, was recorded as an adjustment to Stockholders’ equity rather than as a reduction of income tax expense. We expect to record a full statutory tax		Inherent within the completion of our assessment of the need for a valuation allowance, we made significant judgments and estimates with respect to future operating results, timing of the reversal of deferred tax assets and our assessment of current market and industry factors. In order to determine the effective tax rate to apply to interim periods, estimates and judgments are made (by taxable jurisdiction) as to the amount of taxable income that may be generated, the availability of deductions and credits expected and the availability of net operating loss carry forwards or other tax attributes to offset taxable income. Making such estimates and judgments is subject to inherent uncertainties given the difficulty predicting such factors as		Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material. A change in our effective tax rate by 1% would have had an impact of approximately $1.2 million to net income for the year ended December 31, 2009.

				Potential Effect if Actual Results
Description		Judgments and Uncertainties		Differ From Assumptions
provision in future periods and, therefore, the benefit of any tax attributes realized will only affect future balances sheets and statements of cash flows. In accordance with GAAP, financial statements for interim periods include an income tax provision based on the effective tax rate expected to be incurred in the current year.		future market conditions, customer requirements, the cost for key inputs such as energy and primary aluminum, overall operating efficiency and many other items. However, if among other things, (1) actual results vary from our forecasts due to one or more of the factors cited above or elsewhere in this Report, (2) income is distributed differently than expected among tax jurisdictions, (3) one or more material events or transactions occur which were not contemplated, (4) other uncontemplated transactions occur, or (5) certain expected deductions, credits or carry forwards are not available, it is possible that the effective tax rate for a year could vary materially from the assessments used to prepare the interim consolidated financial statements. See Note 8 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for additional discussion of these matters.
Tax Contingencies.
We use a “more likely than not” threshold for recognition of tax attributes that are subject to uncertainties and measure reserves in respect of such expected benefits based on their probability. A number of years may elapse before a particular matter, for which we have established a reserve, is audited and fully resolved or clarified. We adjust our tax reserve and income tax provision in the period in which actual results of a settlement with tax authorities differs from our established reserve, the statute of limitations expires for the relevant tax authority to examine the tax position or when more information becomes available. See Note 8 of Notes to Consolidated Financial Statements included in Item 8. “Financial Statements and Supplementary Data” for additional information in respect of the recognition of tax attributes.		Our reserve for contingent tax liabilities reflects uncertainties because management is required to make assumptions and to apply judgment to estimate the exposures associated with our various filing positions. Our effective income tax rate is also affected by changes in tax law, the tax jurisdiction of new plants or business ventures, the level of earnings and the results of tax audits.		Although management believes that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material. To the extent we prevail in matters for which reserves have been established, or are required to pay amounts in excess of our reserves, our effective income tax rate in a given financial statement period could be materially affected. An unfavorable tax settlement could require use of our cash and would result in an increase in our effective income tax rate in the period of resolution. A favorable tax settlement would be recognized as a reduction in our effective income tax rate in the period of resolution. Our liability related to uncertain tax positions at December 31, 2009 was $14.5 million.
Inventory Valuation
We value our inventories at the lower of cost or market value. For the Fabricated Products segment, finished products, work in process and raw material inventories are stated on LIFO basis and other inventories, principally operating supplies and repair and maintenance parts, are stated at average cost.		Our estimate of market value of our inventories contains uncertainties because management is required to make assumptions and to apply judgment to estimate the selling price of our inventories, costs to complete our inventories and normal profit margin.		Although we believe that the judgments and estimates discussed herein are reasonable, actual results could differ, and we may be exposed to losses or gains that could be material. A change in our normal profit margin by 1%